Wednesday, May 27, 2009

Valley Home Prices Rise in 1st Quarter says FHFA Home Price Index

FHFA released it's home price index today. Here is the link to the report, tables with Valley metro areas in it are in the middle of the lengthy document.

According to the FHFA index, home prices increased in every Valley metro area in the 1st quarter of 2009 compared to the 4th quarter of 2008. Over the year, Valley metro areas still lead the nation in the size of declines, but it looks like Florida, Nevada and Arizona are now declining faster.

There is precious little in quality home price indexes for these small metro areas. The FHFA all-transactions index includes appraisal data, and many have questioned it's accuracy. The FHFA purchase-only index is only available for larger metro areas and for most of these the purchase-only index shows larger home price declines than the all-transactions index.

So, I wouldn't conclude from the FHFA index that real estate prices are now rising in the Valley. It does provide some more evidence for the point of view that the free fall is over, and prices are finally bottoming out.

April Jobs Report

The headline is California unemployment declines two-tenths to 11%, but that is just noise. Payroll jobs declined over 60,000, another big drop.

Stockton posted a very normal, average April, and that certainly qualifies as good these days.

Most of the Valley showed a normal seasonal increase in farm jobs, even Fresno. Fresno farm jobs are now up 4%, while private non-farm jobs are down 4%.

Year to year job declines in San Francisco and Silicon Valley now both exceed 4%, a big change for these areas that were the last to fall into recession.

Sacramento still looks like the sickest metro economy in the region. An abnormally light April layoff in hospitality and recreation is more a reflection of a merciful end to a poor ski season than a sign of a turnaround.

Thursday, May 21, 2009

Tuesday, May 19, 2009

Can someone explain how we can have a shortage of farm jobs and farm workers at the same time?

Hold on, I keep hearing the big problem is farm worker unemployment because we aren't growing enough vegetables.

OK, I admit there is a lot to the AgJobs bill, much of it good, and immigration is not an area of my expertise. Is it too much to expect Senators to at least update past statments to reflect current conditions? After all, there is no shortage of farm labor now, and it is a very legitimate question to ask whether this bill would have helped or harmed the situation this year. What are the impacts to the economy beyond agriculture?

According to Senator Feinstein,

“Today across the United States, there are not enough agricultural workers to pick, prune, pack or harvest our country’s crops,” the senator said, noting that the shortage has led to thousands of farmers having to watch their crops rot or fallow their farmland in recent years.

Sunday, May 17, 2009

Westside Mayors Respond

Mayors Dhaliwal and Silva let me have it today in the Sacramento Bee. They are upset about this article I wrote. Here are some quotes and a few comments.
Claims that unemployment is not connected to drought are, in our opinion, a challenge to our honesty... We will not let someone unfairly label us because we are Latinos and are not from some privileged class.

Yikes! I didn't know that using data to challenge the statements of Tim Quinn, Lester Snow, Westlands Water District, and the Governor on the leading cause of unemployment in the Valley was a personal attack against the honesty and integrity of Latinos. I did not anticipate nor intend for it to be interpreted that way. I believe the foreclosure crisis has disproportionately impacted Latinos, as has the resulting loss of construction jobs. I am concerned that Latino farm workers did not share in the prosperity of their employers as farm profits soared. I am concerned that the state's tax increase is hitting Latinos and the Valley disproportionately, because of the reduced dependent credit, a direct tax increase of $210 per child, and sales taxes.
And the business forecaster from the University of the Pacific was given 800
words in The Sacramento Bee and Fresno Bee to say the impact of drought on employment was overblown.

What's so terrible about that? Should they not publish a different perspective? These newspapers have written many articles telling the story exactly as they want it. The Sacramento Bee had a front page story with many images of hardship, and the Fresno Bee has run uncountable articles on this issue. The mayors' response to my weekday op-ed was even published in the Sunday paper.
Recently, an associate professor at the University of the Pacific in Stockton released an economic forecast that said high unemployment in the Central Valley was not caused by the drought...we and tens of thousands of our constituents will not allow these so called "forecasts" to be unquestionably assumed to be credible...

I presented current and historical jobs data, not a forecast. The current data clearly shows that farm jobs are up across the Valley, and non-farms are down. In fact, the only bit of my op-ed that is a forecast actually says that farm jobs will eventually decrease this year because of the drought. It is the water exporters who keep referring to forecasts as fact. The forecast from UC-Davis predicting around 40,000 lost farm jobs in 2009 has been constantly referred to as a fact that has already occurred. I have seen quotes in the newspaper that 90,000 farm jobs have already been lost because of the drought, when this was the forecast of a worst case scenario for 2009 that includes all the multiplier impacts.

Nearly 35,000 construction jobs have been lost in the San Joaquin Valley. On average, these construction jobs pay 2-3 times farm jobs, so they will have a bigger multiplier effect in terms of consumer spending. Thousands more jobs have been lost in service sectors, much of it tied to the decline in home equity fueled consumption and the general recession. Even the agriculture sector has been hit by the recession through a collapse in prices and demand. If the forecast of 35-40,000 lost farm jobs comes true this year, that will be comparable to the construction sector in terms of total jobs, but smaller in terms of lost income.

Even in a "farming community" like Mendota, the housing issue has had a big impact. The population of Mendota increased by 25% between 2000 and 2008, and residential building permits soared to several times their usual level. Mendota's population boom came as Fresno County farm jobs declined by over 10,000 (the farm job increase is very recent), while construction and services soared.

I am sure that there has been many lost farm jobs on the Westside and these communities are hurting badly from the foreclosure/drought combination. They are telling the truth about that. But the farm sector is clearly adding jobs in other parts of the Valley, and overall farm output increased since the beginning of the drought. The data shows that farm profits have doubled this decade, but the prosperity of farmers (including corporations that own much of the farmland) has not increased the prosperity of farmworkers. Total wage payments to farm workers were unchanged over this period of soaring profits. Despite the recent record profits, there will be many farms that lose money this year as the recession and overproduction has wreaked havoc on prices, and water restrictions are hitting westside growers hard.

The future of California agriculture?

Interesting story in the LA Times on new, modern greenhouse technology. Of course, it is more expensive to produce this way than in a conventional field (for now), but this is why I'm not worried that we are all going to starve in the future if we don't send more water to agriculture.

The farm's 450 permanent employees climb ladders to pick the fruit instead of stooping. The plants, which are fed individually through tubing that looks like intravenous hospital equipment, produce 20 times more fruit per acre than in conventional field production...has cut water use to less than one-fifth of that required in conventional field cultivation. Fertilizer use has been reduced by half. There are no herbicides and almost no pesticides, and there is no dust.

Wednesday, May 13, 2009

We are #8!

I'll follow my own advice for Valley congressional reps., and redirect my attention from water to housing. The latest ranking of foreclosure rates, shows Stockton has slid from #1 to #8. That helps with image a little bit, but doesn't mean the problem has gone away.

The 5 Valley Congressman between Stockton and Bakersfield may find a little more help from their colleagues in Washington on housing than water. They could band with a larger group from places like Riverside and Vegas, and try to steer the foreclosure relief towards something that will work better in places that have seen the biggest real estate price declines. That means principal reduction (see previous posts on housing for more).

Among large cities, Las Vegas led the way with one in every 56 households receiving a filing. That was a slightly higher rate than the southwest Florida metro area of Cape Coral-Fort Myers, which saw one in 57 housing units receive a filing.
Cities in California took the next six spots: Merced, Modesto, Riverside-San Bernardino, Bakersfield, Vallejo-Fairfield and Stockton. The Florida cities of Miami and Orlando were ninth and 10th, respectively.

Saturday, May 9, 2009

Almonds and the drought/smelt

Nice graph in this article showing the explosion of almond production in recent years.

Growers south of the Delta water pumps are griping about the devastating impact of the water shortage on almond orchards. However, here is an interesting quote from an almond grower who says we are producing too many almonds. He would like to see less production.

But growers, such as Veldstra, are under pressure to cut costs as that supply is
translating into low nut prices."They're priced under the cost of the
production," he said. "It's painful. From a grower's perspective, I would
probably would like to see (the crop estimate) a little lower, 13.5 (billion
pounds) or under just to support the price, but it is what it is,"

Wednesday, May 6, 2009

Bad Journalism

Among the misleading stories about the impact of the Drought, this new one from Bloomberg might be the worst. Once again a reporter seems oblivious to the foreclosure crisis and the real recession.

No mention is made of the thousands of jobs lost in construction, real estate, government, restaurants, and more due to the foreclosure crisis, 50% drop in local real estate values, etc.; all of which occurred before and that dwarf any farm impact. The struggles of these local businesses are all blamed on reduced income of farm laborers: espresso sales, a boutique women's clothing store, and wine shop.

There is a bit of news here. Professor Howitt at UC-Davis has reduced his forecast of drought job losses. When this hits (and it hasn't yet), I would only note that these impacts are a small fraction of the impacts of foreclosures on the Valley. The loss of construction jobs alone has been larger, not to mention the impact of 50%+ decreases in home values on wine shops, espresso sales and the like.

Saturday, May 2, 2009

Legislative Analyst's Office Agrees With Me on BDCP

A follow up to the previous post on the Sac Bee op-ed. The Legislative Analyst's office has the same complaint about the Bay Delta Conservation Plan that I express in the last part of the op-ed: no comprehensive economic study. This is the concluding bullet point from the Legislative Analyst's recent report:

The BDCP Analysis Too Narrowly Focused to Fully Inform
Legislature on Conveyance Issue; Broader, More Comprehensive
Cost-Benefi t and Economic Analyses Required.

...the process does not appear to be giving adequate consideration to the economic impact of the chosen conveyance solution on third parties (such as Delta
farmers) or to the fiscal impact of the various alternatives on
state finances. To address the broader information requirements
of the Legislature, we recommend that the Delta Vision Committee
report to the Legislature with a more comprehensive analysis
of the costs, benefits, risks, and inherent policy tradeoffs in connection
with each conveyance alternative...

Friday, May 1, 2009

Water Won't Wash Away Valley Recession

The Sacramento Bee published an op-ed piece I wrote this morning: Water Won't Wash Away Valley Recession. It is similar to comments I have made in several posts on this blog.

Supporting information and additional comments are posted here.