Tuesday, October 25, 2005

the Sacramento region should grow by almost 370,000 jobs over the next decade.

Sacramento Business Journal

From the October 24, 2005 print edition

Job growth may shift away from construction
Kathy Robertson

Staff Writer

A new forecast says employment in the Sacramento region should grow by almost 370,000 jobs over the next decade.

The number of jobs in the area is projected to reach 1.28 million by 2015, up 41 percent from 906,900 in 2004, according to estimates by the Sacramento Regional Research Institute presented at the Business Journal's Earlybird Economic Forecast Thursday.

Most of the new jobs over the next couple of years are expected to be in government, wholesale and retail trade, business services, healthcare and manufacturing. That's a switch from the recent boom in construction jobs, due in part to a softening in the local housing market.

Despite speculation of an economic slowdown if the housing keeps deteriorating, growth in other sectors is likely to more than compensate for a possible stall in the number of new construction jobs, said Matt Newman from the Palo Alto office of Blue Sky Consulting Group, which worked on the forecast.

"I would expect a return to a more typical pattern for the Sacramento area," Newman said. "Over the last five years, it's been led by the construction sector. I'd expect modest gains there in the next year or two, but growth in other areas."

One of those areas could be manufacturing.

Manufacturers are prospecting the region more than any other type of employer, according to figures from the Sacramento Area Commerce and Trade Organization. It says a third of the businesses checking out the area for possible expansion are in this sector.

Almost a quarter are distributors, the warehouse-type employers that store materials and ship them out to various locations. Call centers are third, followed closely by service-related businesses. Information technology and biotech companies trail, but show up in the mix.

Historically, the manufacturing sector has had a smaller presence in Sacramento than in other parts of the state, but the region has also lost fewer such jobs than other areas have.

"In part, we've held on because we've had less far to fall," Newman said.

Close to half -- 45 percent -- of the employers thinking about moving or expanding to Greater Sacramento are from other states, SACTO says, a switch from recent years when the trend was migration from the costly Bay Area to more affordable Sacramento.

"What we're learning is this is a way to get into California while space is available in order to be in position when the economy starts to fire again," said Barbara Hayes, executive director of SACTO.

Manufacturers that set up shop in the region in 2003 and 2004 include CertainTeed Corp., Interpac Technologies Inc. and Intex Forms.

CertainTeed, a Pennsylvania building materials manufacturer, opened a plant in West Sacramento in March 2004. Interpac Technologies of Petaluma is a dried-food packing company that leased a warehouse in Woodland in April 2003 for its distribution division. Intex came from Gilroy in mid-2003.

"We've always had distribution," Hayes said. "What we're seeing now is, instead of the standard warehouse with stuff stacked to the roof, is a handful of companies that are looking to do final assembly here. The pieces come in from offshore and get assembled here."

Expansion by local companies is likely to pick up too. While only 6 percent of current companies prospecting for more space in the region are local, production per employee hit an all-time high about six months ago, Hayes said. Pretty soon, they will have to add workers to help them out.

Overall job growth is projected to continue at 1 percent to 2 percent per year short term. The Sacramento region added about 15,000 jobs over the last year, for a growth rate of 1.7 percent.

Two percent job growth is considered a target, said David Lyons, a labor market analyst with the state Employment Development Department.

"Below that is considered slow growth. Above, it's decent job growth," he said. "Sacramento is right on par with what's happening nationally and statewide."

Better pay
Wage levels in Sacramento have generally kept pace with national averages, but could see an uptick in the future, according to local projections prepared by the Palo Alto-based Center for Continuing Study of the California Economy.

The center assumes the average wage will rise 1.1 percent faster than the rate of inflation. A couple of factors could push it higher, though.

First, worker productivity has risen more than 2 percent annually since the early 1990s. Second, two of the growing job sectors demand high wages.

One is the growing number of professional service jobs that stem from the region's role as the state capital. The other is the potential for more migration of high-tech jobs from the Bay Area.

Rising housing prices have also driven wages up closer to Bay Area levels. Kaiser Permanente, one of the area's growing employers, recently agreed to end a two-tier wage system that paid Sacramento employees less than Bay Area workers.

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