Keitaro Matsuda, senior economist at San Francisco-based Union Bank of California NA, says the state is enjoying "a near-perfect balance" between the depressed Bay Area in the north and deceptively strong regional economies in the central and southern parts of the state. The combination, he adds, could help the entire state stay afloat as most other parts of the US sink into recession.
Matsuda acknowledges that the San Francisco Bay area and the Silicon Valley are still suffering from the dot-com bust. But he says those negative conditions are being offset by a general upward trend in job growth and housing prices in the Central Valley and the Southland.
The economist notes that a recent study found that the Central Valley cities of Modesto and Stockton had the highest home-price appreciation in the country, each with gains of more than 20%. "This is further evidence that the prosperity in the coastal area is finally spreading to the Central Valley," Matsuda writes in his most recent economic report.
Meantime, the economist adds, increased defense spending in the wake of the Sept. 11 terrorist attacks is boosting the regional economy in Orange, LA and San Diego counties. The LA-Orange commercial real estate markets have remained fairly stable, Matsuda says, while San Diego's office vacancy rate of 8.5% is the lowest in the state.
"The housing market also shows a positive pattern, with Los Angeles showing a strong gain of 13.3% and Orange County home prices increasing by 12.1%," Matsuda writes.
Heading into 2002, Matsuda feels that the Los Angeles and San Diego economies will track the national trend and recover by mid-year. Southern California will avoid falling into a recession, he adds, at least in terms of employment.
Conversely, the San Francisco Bay Area will continue to struggle with joblessness and rising real estate vacancies. The technology sector won't rebound until 2003, the economist says.
"Although it's stormy in the Bay Area, there are high clouds in Southern California. We're walking a fine line between recovery and recession," Matsuda writes.
Union Bank, the primary subsidiary of UnionBanCal Corp., is the third largest commercial bank in California. It also has offices in Oregon and Washington, as well as in 15 foreign cities.
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