Study predicts healthy future for Solano business

By Robin Miller/City Editor

Biotech giant Genentech expands, the real estate market continues to boom and employment numbers grow by some 2 percent each year. This is the picture painted of Solano County in a study released last week by the University of the Pacific's Business Forecasting Center. The 100-page report projects the business climate statewide and in nearly a dozen metropolitan areas, including Solano County, through the next 25 years.

Among the study's more significant findings is that employment in Solano County will grow by some 13 percent by 2010 - from 127,400 jobs in 2005 to 143,900 jobs in 2010. The construction, service, professional, education, health and leisure/hospitality job sectors are all expected to see growth in the news few years, according to the study.

Meanwhile, it predicts that as population continues to grow steadily through 2007, the unemployment rate is remain stable around 5.6 percent. "The continuing trend of Bay Area workers migrating east in search of affordable housing is expected to fuel employment growth in the construction sector," the report states.

And although manufacturing employment is down on average statewide, the study says it will continue to grow at 2.2 percent per year "as firms like biotech giant Genentech and bio-diesel producer Bio-Energy Systems grow."

The real estate market and its future also play a significant role in the report's findings. "The U.S. housing market, in general, and California specifically have seen steep price appreciation in recent years," noted Sean Snaith, director of the Business Forecasting Center.

"The run up of prices has been fueled by record low long term interest rates which, despite the best efforts of the Federal Reserve, have stayed low and recently have dipped even lower."

But Snaith disagrees with other recent studies that liken the state's real estate market to a bubble that is about to burst.

Instead, Snaith likens the market to the baking of a souffle because "it is the end result of just the right ingredients put together at just the right time in just the right environment that has allowed for prices to make this historic climb."

If any of the ingredients are removed - which Snaith said includes "demographics, rising employment, falling unemployment, record low mortgage rates, financial innovation in mortgage markets, low inflation and rising incomes,"- the souffle will deflate.

"When will the housing market deflate? How far and how fast? The answers to these questions have implications not only for the housing market, but also for the overall economics of the United States and California," Snaith writes. "In the meantime, tiptoe past the oven and refrain from opening the door."

As for the rest of the state, the long-run outlook for California's economy is strong, Snaith said. Shorter term, he predicts that California's payroll will grow at a rate of 1.6 percent per year through 2007, while unemployment holds at around 5.8 percent.

Robin Miller can be reached at citydesk@thereporter.com.

Economic Highlights
• Average annual wage will grow from $42,200 in 2005 to $54,200 in 2010.
• Total employment will grow from 127,400 in 2005 to 143,900 in 2010.
• Unemployment rate will remain steady at 5.6 in 2005 and 5.7 percent by 2010.
• High growth sectors statewide include construction, professional and business services, and transportation, warehousing and utility.