Founder of Beacon Economics Shares Local Insights at Spring Economic Forum Hosted By Torrey Pines Bank
From jobs to real estate, the economic recovery in Orange and Los Angeles counties is well underway even as consumer spending pushes inflation to levels not seen since the 1980s.
The Federal Reserve increased interest rates for the first time in three years, a tactic it says will stymie inflation.
But interest rate hikes aren’t the answer to combatting inflation. Instead, it needs to tighten the money supply, economist Christopher Thornberg said at a recent economic forum hosted by Torrey Pines Bank and reported in The San Diego Union-Tribune.
“By my calculations, Americans lost about $820 billion in income over the course of (the pandemic), for which the federal government gave us back $2.1 trillion — a ratio of 2.6 to 1,” said Thornberg, founding partner of Los Angeles-based Beacon Economics. “That’s preposterous. … We overdid it and now we’re inflating.”
In Los Angeles and Orange counties, employment was down 3.1% and 3.5%, respectively. But both counties are expected to surpass pre-pandemic levels of employment either later this year or early next year as things transition back to normal.
The dwindling supply of workers will limit the extent to which companies can add people to their payrolls, but the labor force is recovering from the shock of the pandemic.
Many businesses are dealing with the shortage of employees by implementing new systems and equipment — both of which can be capital intensive.
“Our expertise in a variety of areas enables Torrey Pines Bank to support our clients and help them achieve their business goals in any economic landscape,” Torrey Pines Bank Division CEO John Maguire said.
The housing market in Southern California and nationally has been hot — primarily because the Fed kept interest rates low and a consumer preference for larger living spaces during the pandemic when most people were forced to work from home.
The number of homes sold and sales prices both increased substantially in the fourth quarter of 2021.
Home sales in Orange and Los Angeles counties increased by 33.7% and 40.4%, respectively. Prices for existing single-family homes were up 19.3% compared to the same period a year ago, and up 12.1% in Los Angeles.
Commercial Real Estate
As remote work becomes the norm, the office market will have to adapt. Los Angeles County added more than 51,000 office workers in 2021 but the net absorption of office space declined by more than 800,000 square feet. The same pattern occurred in Orange County. Even so, the outlook for construction activity remains positive as companies renovated or expanded their existing space.
While Orange County saw an overall decline in non-residential construction permitting last year, some segments were up. Office saw an uptick of 114.1%, retail was up 71.4% and industrial skyrocketed by 223.2%.
For more great insights about the Southern California market and how we can help your business find advantage in every economic climate, reach out to your relationship manager at Torrey Pines Bank.
To hear the insights and thoughtful analysis from Dr. Christopher Thornberg, a full recording of his presentation is available below:
If you are interested in viewing the slides from the presentation, click here.
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