Davis and Yolo County discuss possible recession

Experts
disagree as to whether the country is headed for a recession, but one
thing is for sure: 2008 will be a slow year for the economy.

The economist definition [of a recession] is three consecutive quarters
of negative growth, said Paul Navazio, finance director for the city of
Davis.

Experts disagree as to whether the country is headed for a recession, but one thing is for sure: 2008 will be a slow year for the economy.

The economist definition [of a recession] is three consecutive quarters of negative growth, said Paul Navazio, finance director for the city of Davis.

While it’s difficult to determine if the economy is in a recession until all the data is aggregated, key indicators like unemployment, consumer spending and the housing market can give clues.

Although some experts aren’t predicting a recession, they are anticipating a lot of problems in the first half of 2008. The slowing housing market and its drag on the economy’s gross domestic product will lead to one quarter of negative growth, according to The Anderson Forecast, a UCLA think-tank report.

Different people have different definitions of what a recession is, Navazio said. For most lay people and folks who are working on budgets, a recession could be just a general slowdown.

The good news is Davis most likely won’t be feeling the effects of a recession as much as other cities.

In Davis, we’re probably seeing less of a slowdown, Navazio said. There are communities seeing reductions in sales or property tax that are feeling the malaise in the economy more than Davis.

While Davis does have its economic ups and downs, it is generally more insulated than other communities from economic cycles. This is in large part due to its strong housing sector and lack of big box stores. Cities that get a lot of their tax revenue from strip malls and chain stores are heavily dependent on the sales tax the stores generate, so they are more sensitive to economic downturns, Navazio said.

Davis is also unique in that it has a stable employment base in the university.

The largest employer in town is the university and a lot of employees are residents in Davis, he said.

Despite Davis’s buffer from the outside economy, the city continues to monitor the trends, said Sarah Worley, city of Davis economic development coordinator.

Certainly we’re concerned, she said. If people lose their jobs, they have less disposable income to purchase things in town and there are residual effects of that for local businesses.

Yolo County doesn’t seem to be faring as well as Davis.

As we’re looking at budget projections for the next year, it’s definitely looking to us like there is going to be a recession, said Pat Leary, assistant county administrator.

The county is heavily dependent on property tax revenues with 67 percent of the General Fund coming from property taxes, Leary said.

We’ve definitely seen a housing market decline, she said.

The county is planning its budget for next year in anticipation of bad economic times, Leary said.

Economists can disagree, Leary said. But for county government, if the housing market is declining, it’s just like a recession.

 

ALYSOUN BONDE can be reached at city@californiaaggie.com. XXX