Bright Future for San Diego, US Economy, Says Economist Christopher Thornberg

Beacon Economics Founder Discusses Economic Landscape During Fall 2023 Economic Forum Hosted by Torrey Pines Bank

October 23, 2023

As of fall 2023, inflation has not declined to the Federal Reserve’s target 2% level despite repeated interest rate hikes — but according to economist Dr. Christopher Thornberg, the economy isn’t in the dire straits some news reports would have the public believe. 

Despite issues such as a tight labor supply, San Diego has one of the best economies in the country, Thornberg said. Housing growth is higher than in other parts of the state, airport traffic is nearly back to where it was before the pandemic and the hotel sector is doing well, with revenue per available room up 40% from pre-Covid levels.

The U.S. economy contracted by 11% from the fourth quarter of 2019 to the second quarter of 2020 — its biggest dip in history. But the downturn was short-lived, lasting only about 10 weeks. The economy started to revive in the third quarter and was back to normal output levels within a year.

“At the bottom, it was a five-quarter recession,” economist Christopher Thornberg said at a recent economic forum hosted by Torrey Pines Bank. “Contrast that to the Great Recession, which was six quarters down, and it took us seven years to get back to normal levels of economic output.”

Today, business research group The Conference Board predicts a recession in the next year — but Thornberg believes a recession is unlikely. 

The Economy

Surging inflation and Federal Reserve interest rate hikes have pressured the economy over the last 18 months. Thornberg said the “infamous inverted yield curve,” which occurs when long-run interest rates are lower than short-run interest rates, is a leading indicator of recession.

“The last six recessions were preceded by an inverted yield curve,” he said. 

But it hasn’t happened this time. Instead of dipping into a recession, consumer spending has resulted in an acceleration of the U.S. economy since 2022. A preview of third-quarter 2023 numbers from the Federal Reserve Bank of Atlanta indicates the third quarter will show 5% growth. 

Restaurant sales are 35% higher than before the pandemic, and Nevada gaming revenue has never been higher. More Americans than ever are traveling abroad, and events promoted by multinational entertainment company Live Nation sell out immediately. 

“Consumers are having fun, period,” Thornberg said. 

Automobile sales are down, but it’s because manufacturers can’t keep up with the demand for new vehicles, as evidenced by the high cost of Tesla S cars. New car inventory remains less than 200,000 — a fifth of what it was about four years ago. 

Businesses also continue to spend money, the labor market is tight, the unemployment rate is low and wage growth has bounced back into positive territory. 

In San Diego, payroll jobs peaked at 1.52 million before the pandemic but are now up to about 1.7 million. 

“Overall job growth is slowing down, but it’s slowing down again because the labor markets are so tight,” Thornberg said. “It’s not that there’s a lack of labor demand in San Diego. There’s just nobody to hire.”


Interest rate hikes meant to curb inflation have increased the cost of borrowing money, which in turn caused home sales to decline. After a brief swoon, Thornberg noted, housing prices are rising again, and housing starts are solid at about 1.5 million per year. 

“In Southern California, you see the big decline in unit sales,” he said. “We know that there’s very little out there to buy. There are very few people willing to sell, and as a result of that market tightness, prices here are yet again starting to go up.”

The median price for a home in San Diego dropped below $900,000 last summer but is now approaching $1 million. 

The Bottom Line

Thornberg noted that while there have been “nonstop” predictions of a recession over the past 18 months, those projections have been wrong. 

“With all that being said, there also are some pressures that are about to hit our economy,” he said. “But let’s be honest, [San Diego] is one of the best economies in the country. There are some tensions, some issues, and the labor supply is incredibly tight. Nevertheless … the demographics in San Diego are looking a lot better.”

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