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CSU Stanislaus forecasts slow, steady economic growth | Central Valley Business Journal
Wednesday, 30 November 2011 14:54
Written by Jonathan Mumm
CSU Stanislaus economist Gokce Soydemir
Optimism is a key word when looking at the current economic picture, a California State University, Stanislaus economic researcher told a gathering of Central Valley business leaders Tuesday.
“Particularly at this time, there is no room for pessimism,” said Dr. Gökçe Soydemir, CSU-Stanislaus’ Foster Farms Endowed Professor of Business Economics, “because it’s going to lead to a self-fulfilling prophesy of making things worse.”
In presenting the inaugural CSU-Stanislaus Business Forecast at the Double Tree Hotel in Modesto, Soydemir painted a picture of San Joaquin Valley business making slow, but steady progress.
“The data shows that the Valley economy is stronger than many people think,” Soydemir said. “Most of us would like to see faster movement, but that’s not happening.”
However, he said, the data supports the position that the Central Valley is in a relatively stronger state now than a couple of years ago. The Central Valley continues to face economic challenges because of a lack of business diversity, but Soydemir maintains there should be optimism about economic recovery.
The report and presentation, sponsored by Foster Farms, Calone and Beattie Law Group, Valley Wealth Inc., and the Central Valley Business Journal, provides detailed information about the Central Valley’s economy. It also gives an assessment for the area’s employment by sector, housing, inflation and prices, and banking and capital markets. It is expected that subsequent forecast reports will be presented annually with midyear updates.
CSU-Stanislaus President Hamid Shirvani first had the idea to launch the reports six years ago.
“I had the idea in mind since I arrived (at the university),” Shirvani said.
He based the concept on similar forecasts done by universities in Southern California that, he said, really engaged the local business communities.
“It brings the business community together,” Shirvani said. “Part of our job is to help and support the businesses in the community. That’s one way of doing it.”
Family owned and operated Foster Farms put up a half million dollars to establish the endowed chair. Soydemir’s report looks at data from eight counties including San Joaquin, Stanislaus, Fresno, Kern, Kings, Madera, Merced and Tulare, which has a population of about 4 million people. The forecast uses models developed by economist Christopher Sims, the winner of the 2011 Nobel Memorial Prize in Economic Science.
“The advantage of these models is they do an excellent job of predicting turning points,” Soydemir said.
He said he believes local business leaders will be able to find a very practical use for the forecasts.
“There is a lot of confusion out there,” he said, “the same day (different) articles appear, one is pessimistic, saying we’re doomed, the other saying, ‘Hey, look, we’re improving.’ I’m hoping these reports will shed some light on that confusion, eliminate some uncertainty, and allow businessmen to make more informed decisions.”
“As many investors already realize,” according to the report, “the region’s underutilized resources of land, labor and capital offer many opportunities in education and health services, manufacturing, transportation and logistics, and information technology. The new proposed infrastructure of high speed rail and other projects are expected to make the (Central) Valley significantly more attractive to investors.”
Unemployment continues to be a problem locally, as it does nationally, with local numbers traditionally higher than the national average. However, there were positive surprises in the report, Soydemir said.
“Yes, there were certain sectors like leisure and hospitality business employment and wholesale trade employment that are showing positive growth in a 9 month period of 2011. These are expected to extend into 2012.”
Soydemir’s report indicates the possibility of a “double dip recession” is now less likely and a comparison of the labor force and employment annual growth rate reveals the gap between the two is closing.
Soydemir, however, does not see a real end to the crisis until banks start lending money again.
“That’s the general consensus,” he said. “Maybe nobody’s applying for loans. That might be true. We’re not giving loans because there is no demand due to low credit ratings, but we need to find a way to overcome new regulations and start extending loans. I think that’s the critical component because (while) banks are full of cash, loans and leases are going down. That is an anomaly that needs to be addressed.”
The business forecasts will be presented on a semi-annual basis. A modest sized crowd was on hand and CSU-Stanislaus President Shirvani is hoping the business leaders who attended the inaugural presentation would spread the word to their friends and business colleagues.
“I’m hoping and dreaming two or three years from now to have 500 people sitting here and listening to the presentation,” he said.