Hotels, Retail Define Sacramento's Woes

Sacramento’s economy will lag the nation into recovery, as California state budget shortfalls and a soft housing market hinder its progress. Employment growth will resume this year, though, a welcome turnaround after losing a combined 86,000 jobs in 2008 and 2009. During 2010, local Employment will rise by 0.7% with the addition of 5,300 jobs, 30 basis points shy of the US job growth forecast. Despite this small step in the right direction, the unemployment rate will remain well above average in the near term. As of mid-2010, local unemployment had fallen from its peak in the first quarter, but at 12%, it remained approximately 200 basis points above the US figure.

In addition to elevated joblessness, Sacramento continues to face challenges stemming from the housing crash, with the metro area registering one of the higher foreclosure rates in the nation. Local home prices have declined more than 50% from peak levels of late 2005 and could slip farther if government programs aimed at curtailing foreclosures fall short, resulting in more deeply discounted bank-owned inventory and hampering the onset of a sustainable growth cycle.