CHICO — The economy in Butte County will slow down in 2023, but not to the extent of a declared recession. That was the bottom line from the Economic Forecast event Thursday at Chico State.
“We do expect this year to be a tough year,” economist Robert Eyler told a full auditorium in Bell Memorial Union.
He came short of predicting a formally declared recession — no “capital-R recession,” Eyler told this newspaper — but detailed recessionary factors economists are seeing.
Eyler forecast drops in inflation (from a peak of 5% in October to 4.5% this year and 3% in 2024), housing prices (10% to 15%) and jobs (likely limited to tech, logistics and retail), with interest rates up in six months and down the following year and a half.
Those national-level indicators reflect what’s expected in Butte County and the north state.
“We know the economy is slowing down,” Eyler said. “Whether it will slow down in such a way as we’ll get a declaration of recession is unknown.
“But it’s actually less important, with the idea that with the economy slowing down, we need to prepare for that, whether we go deep or shallow. The slowdown is going to affect the way you spend money, whether or not you hire, whether or not you go into a commercial lease, whether you buy a new piece of equipment.
“We’re going to have business effects whether we have a declared recession or not.”
Chico State’s Center for Economic Development hosted the Economic Forecast, in its 23rd year. Along with business and nonprofit leaders, attendees included Chico City Councilors Dale Bennett, Deepika Tandon and Tom van Overbeek; City Manager Mark Sorensen, Chico Fire Chief Steve Standridge and Police Chief Billy Aldridge; Butte County Supervisor Bill Connelly, Treasurer-Tax Collector Troy Kidd and Superintendent of Schools Mary Sakuma; Oroville Mayor David Pittman, and Butte College President Virginia Guleff.
Sessions covered climate vulnerability, agriculture resiliency, water policy, mitigation planning and rural impacts on small businesses along with the economic assessment, which started the day-long event.
Local indicators
Butte County and California are following several national trends that often signal recession, Eyler explained, such as construction and spending. Jobs, however, may preclude declaration of a “technical recession”: Economic models see unemployment hovering around 4% for the next three years.
“We’ve seen wages increase across Butte County,” he said, pointing to a two-year increase of 6.9% in the county. (Statewide, the jump is 10.1% in median wages.) “That’s good for lower-wage workers, tough on small businesses.”
Median housing prices have increased 20.1% in the county the past two years but just 5.4 percent over the past year — on par with state jumps (27.4% and 5.9%, respectively).
Construction numbers have remained flat, though, despite Gov. Gavin Newsom’s push for 1.5 million new housing units in California by the end of the decade.
“We don’t expect round 2 of the Great Recession,” Eyler said of the housing sector. “Problem is, we’re not building enough.”
That amount of more affordable housing “may not come to fruition,” he added, “so we may be talking about the same thing 10 years from now.”
What should locals take away from the analysis?
“Four things from the local economy that come from the national,” Eyler told this newspaper. “Wages aren’t going anywhere, so small businesses are going to have a pinch on them for costs, which means that if they lingered through the post-pandemic times pretty well, the pressures are going to continue to mount, unfortunately.
“We should expect housing prices to fade a little bit; we should expect some job losses; and then we should expect inflation is not going away in terms of getting back to a pre-pandemic level before probably the middle of this decade.”
