Economic Outlook

Message as of the April 2, 2024, Proposed Budget publication date.

• Fully one-third of the global population will go to the polls in 2024, but an unprecedentedly dysfunctional US election could be by far the most consequential for the world's security, stability, and economic outlook. The losing side—whether Democrats or Republicans—may consider the outcome illegitimate and be unprepared to accept it. Eurasia Group
• The US economy projects healthy growth of 2.1% real Gross Domestic Product (GDP) for 2024, a 4.0% median unemployment rate, and a 2.4% median PCE inflation. The greatest risks to economic growth are the peaceful transfer of presidential power, the increasing frequency of climate disasters, and disruption due to artificial intelligence. St. Louis Federal Reserve Economic Projections
• California's economy, projected to outpace the nation's, faces similar political and geopolitical risks, with continued growth driven by tech and aerospace sectors, tempered by challenges in housing and migration patterns. UCLA Anderson Forecast
• Local Trends: The county has a shrinking labor force, an aging population, a housing affordability crisis, and is responding to increasingly frequent climate disasters, requiring new strategies to address complex challenges. Santa Cruz County State of the Workforce Report

County Labor Force

Since March 2020, the labor force across Santa Cruz County has declined over 3 percent. Although the employment rate is 95 percent, the countywide labor force is 7 percent lower than its peak in June 2019.

Median Household Income

Median household income across Santa Cruz County stands at $101,068. A significant equity gap remains as Latinae households earn 26% less than the total county median figure. Recent inflationary pressures and the trend of home price increases will counteract gains in wages as we see that nearly 60% of all renters spending more than 30% of their income on rent.

The 2024-25 California State Budget, aimed at addressing a $73 billion shortfall, proposes a blend of spending cuts, reserve use, and minor revenue adjustments. The most substantial reductions target educational institutions, with anticipated future deficits signaling tough decisions ahead. The budget's optimistic revenue projections and the sustainability of its solutions warrant careful legislative scrutiny and prioritization of expenditure reductions. The Legislative Analyst’s Office presentation to the Senate committee on Budget and Fiscal Review, summarizes the Governor’s proposals to offset the Governor’s projected $58 billion deficit. Read the California Legislative Analyst’s Office 2024-25 budget report here.

The California State Association of Counties’ concerns about the budget underscore potential negative repercussions for local services and programs, highlighting the need for ongoing funding in critical areas like homelessness prevention, safety net services, and housing initiatives. Reduced support for waste diversion further emphasizes the challenges local governments face in achieving environmental objectives.

We are rapidly aging

People eligible for Medicare outnumber grade schoolers by 3 percentage points and by 2030, one of every four County residence will be over 65. As more of our county population retires, there could be impacts to housing turnover, discretionary spending, and new demands for county services.

Our children cannot afford to live here

Since 1980, Santa Cruz County added 80,000 people and only 26,000 housing units.  This suppressed supply has driven the County to be considered one of the least affordable communities in the United States. In 2023, the hourly wage needed for a two-bedroom home is $63.33 — an annual income of $131,720.

The County's high housing values (median value of over $1.02 million) does not translate to robust property tax revenues due to restrictions on how the County can tax property. Review the County's Housing Dashboard for more: Housing Progress (santacruzcountyca.gov)

We are experiencing more frequent and severe climate disasters

The County has experienced seven federally declared natural disasters since 2017. Combined, these disasters have cost the County over 250 million. While State and Federal agencies will assist the County, there are immediate strains on the County's financial position as we await financial assistance. Given the increased frequency and intensity of climate change driven disasters, the County is evaluating strategies to meet these challenges.

We need to reimagine a County that challenges inequality and creates resilience

In order to build a sustainable, thriving economy, we have to find opportunities that not only allow our own children and youth to thrive, but allow more families to be included in an economy that values the contributions of the past and builds towards an equitable future. The County's 2023 Housing Element update is an opportunity to meet existing and projected housing needs for all segments of the community, including various household types, special needs populations, and all income levels. Doing this means taking meaningful actions that address disparities in housing needs and in access to opportunity, replacing segregated living patterns with truly integrated and balanced living patterns, and developing at greater densities within the County's urban services line.

The County's Climate Action and Adaptation Plan, adopted by the Board of Supervisors in December 2022, aligns with the Housing Element to support quality of life for all residents by reducing emissions from personal vehicles through developing balanced neighborhoods and communities that result in shorter car trips, expanded safe walking and biking opportunities, more robust and decarbonized public transit options, and improved internet connectivity. The plan maintains open space and makes us more resilient in the face of increasingly frequent climate disasters.

Finally, the County will be developing a Master Plan on Aging for older residents currently living through the many different stages of the second half of life. By 2030 it is projected that 25 percent of County residents will be over 65. Ensuring the physical and social resources for those adults, and for younger generations who can expect to live longer lives than their elders, is critical for the sustainability of the County and its unique culture. The Master Plan on Aging will build on the Housing Element and Climate Action and Adaptation Plan to support communities of all ages – family, friends, neighbors, coworkers, and caregivers – surrounding older adults and people with disabilities.