Back to #2

I guess I was premature in celebrating Stockton's slide from #1 to #8 in the foreclosure rankings. Back up to #2 this month. Las Vegas continues to hold the top spot.

The other water march

A few weeks ago, I was labeled anti-Latino for writing an op-ed that argued claims that water shortages were driving Valley unemployment were overstated. The anti-Latino label is quite a stretch since the article provided no actual quotes to support it, misrepresented the facts I cite as forecast/opinion, and I have presented the same information to Mexican-American groups without offending anyone.

My original article primarily addressed the news releases and public statements of water contractors, not the Latino Water Coaliton or the march they sponsored. Since the article was so offensive, I found these photos of the water contractors own march on the state Capitol interesting. ACWA (Association of California Water Contractors)

Should California consider additional tax increases?

Yes the propositions were pummelled at the polls, but does it mean all tax increases should be off the table? Here is a story from today's Sac Bee, and their list of some proposed tax increases.

• Increasing the top personal income tax rate from 9.3 percent to 10 percent for incomes of more than $250,000 and 11 percent for incomes of more than $500,000.
  • Restoring state fees on motor vehicle licenses to their 2003 levels.
  • Reassessing all commercial property, thus raising property taxes on nonresidential property.
  • Increasing corporate income tax rates.
  • Imposing an oil production tax.
  • Raising tax rates on tobacco products and alcoholic beverages, and extending the state sales tax to some services and admissions to entertainment venues and sporting events.
  • Repealing legislative actions last year that gave tax breaks to California corporations and small businesses.

My opinion on these ideas:
No
No
No
No
Yes (oil production)
Yes (alcohol, tobacco, and extending sales tax to services, entertainment)
Don't know, depends on the specific cut.

This would be a small amount of revenue compared to the deficit, so spending cuts would still make up the vast majority of the budget solution.

State Budget Solution: 24 hours of dictatorship

From the Governor's interview with Sacramento Bee editors in response to the question of whether he has personal responsibility for the State budget mess. [I didn't watch the video. I hope he was joking when he said this.]

as I said, it's not like it's a one-man show where I can make all the decisions. I wish I have ... like someone asked me in one of those interviews, what are the three things if someone would give you the power to change three things? I said I don't need three things. I just need one, and that is, give me 24 hours where I can make all the decisions. Alone. And then everything will be solved, all these problems will be solved. I guarantee you.

We're all going to die!

according to the Governor and Westlands in response to new rules protecting salmon, steelhead, green sturgeon and killer whales from extinction,

Westlands Water District called the new rules, "a death sentence for
large parts of California's economy."
"This federal biological opinion puts fish above the needs of millions of
Californians and the health and security of the world's eighth-largest economy,"
Gov. Arnold Schwarzenegger said in a statement. "The piling on of one federal
court decision after another in a species-by-species approach is killing our
economy

Actually, the Valley is currently awash in surplus crops, especially milk and almonds. The human species will survive just fine with a little less food production in the Valley. (and many farmers will be better off too, although there are certainly some that will lose and they are the one's screaming the loudest)

The fish vs. people argument is wrong. Protecting salmon from extermination in California is very much in the interest of people and has great economic value.

Mad About Government Loans

Are you upset about corporate bailouts? Don't think Wall Street or automakers will pay back taxpayers? Concerned about the national debt?

Read this GAO report on how irrigated agriculture on the Westside of the Valley is progressing on repaying their interest free loans over the decades. Forget about barely paying back the principal, the interest subsidy undiscussed in the GAO report is by far the biggest expense.

One recurring criticism in the Wall Street and GM bailouts has been their employees generous pay and benefits. It sure would be nice for the Valley and all the struggling workers on the Westside if that was the reason the Westlands and San Luis water contractors couldn't pay.

U.S. Cap and Trade, Climate Change Proposals

Dallas Burtraw from Resources for the Future (RFF) has posted a brief study analyzing the effects of cap and trade program currently in Congress. A few years ago, I was fortunate to work with with Dallas and other RFF staff on a northeast region climate change study and have a lot of respect for their work.

Personally, I would like to see a smaller share of the permits given away to industry (and a larger share auctioned) than in the current proposals for an 85% giveaway. If I recall RFF had done some interesting work on this in the past, and had proposed a 35-40% free allocation as sufficient compensation to industry. Regardless of the final form of this important detail on the permit auction %, it is good for both the environment and the California economy that climate change is being taken seriously in Washington.

This picture (from RFF) of the projected change in electricity rates from cap and trade illustrates some of the benefits to us locally. It will help close the gap between electricity rates here and the rest of the country and reduce our cost of doing business and living relative to the rest of the country. California is committing to acting alone regardless of what the U.S. does, and although I admire the spirit, it will be a lot better for our economy if others follow our lead.

Wasting Water

I have heard numerous commments this year from agricultural interests that letting the Sacramento Rivers water run through the Delta out to the Golden Gate is a waste of water, despite the many environmental problems with increased diversion.

I guess it is better to pump it to the desert to grow alfalfa for dairy cows so you can pour the milk down the drain. See this story in the SacBee.

Like many industries, the business cycle in dairy can be tough, and good business people manage the highs and lows. This farmer is a good example.

Simoes, who with his son and six employees milks about 500 cows, expects to outlast the downturn. He didn't expand and take on new debt in the last boom.

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.

Green Team San Joaquin

I'm not involved in the Green Team, but know many who are and support their efforts.

I wonder if I can get my wife and kids interested in one of those artificial lawns. I would have more time to blog!

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.

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.

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.