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Economy expected to remain stable

Despite planned layoffs and a soft housing market in Ventura County, a study finds cause for some optimism.

September 07, 2007|Gregory W. Griggs | Times Staff Writer

Despite a soft housing market and the layoffs planned by Amgen Inc. and Countrywide Financial Corp., the Ventura County economy is expected to remain stable and those workers who lose their jobs are likely to find other employment in the region, according to a new economic report.

The two Fortune 500 companies have been a big part of the county's economic engine over the last decade, and their planned job cuts are not expected to significantly hurt retail spending or spur a recession, said Mark Schniepp, director of the California Economic Forecast.

"Things will not be that bad," he said.

Schniepp presented a midyear update of his 2007 economic predictions at a conference Thursday in Thousand Oaks. Although housing sales are down, overall home values in the county remain relatively strong as does consumer spending, his report found. And although the job market has slowed, skilled workers remain in demand by area employers.

"There will be a drag in overall growth, but recent events are not enough to materially impact the local economy, let alone sink it," the report said.

Still, the county is likely to feel the pain of cutbacks by two major employers.

Last month, Thousand Oaks-based Amgen, the county's largest private employer and the world's largest biotech company by sales, announced it was cutting 2,200 to 2,600 jobs. Of its 20,000 employees worldwide, 8,600 are based in Thousand Oaks.

The biotech firm has been rocked by studies that raised safety concerns about two of its best-selling drugs: the anemia medications Aranesp and Epogen. Those drugs, which are the single biggest medication expense in the federal Medicare program, accounted for half of Amgen's $14.3 billion in revenue and 60% of its $2.95 billion in profit last year.

In addition to Amgen's troubles, Countrywide Financial on Wednesday said it had eliminated 900 jobs nationwide. About 6,000 of the mortgage giant's 61,000-person workforce is in Simi Valley and 9,000 others work throughout Southern California, including at the firm's headquarters in Calabasas.

The two companies added more than 900 jobs, on average, each year to the Ventura County labor pool over the last decade, Schniepp's report said. Even if there were no layoffs, the economic survey said "the lack of new hires will be akin to 900 workers laid off per year."

How severely this will affect overall job growth is unknown, the report states. That will depend on the number of local jobs affected and the strength of the regional economy for the remainder of the fiscal year.

Low unemployment rates in Ventura and neighboring Santa Barbara and Los Angeles counties make it likely that Amgen and Countrywide workers who lose their jobs will find other employment in the area, according to the economic study.

Fears that layoffs at Amgen -- whose local employees earn an average annual salary of $162,000 -- would significant hurt the county's economy are also unfounded, the report found. The main reason is that unskilled workers are those most likely to lose their jobs, the study said.

"You're not going to cut your most skilled workers who are doing all the drug research, because when [business improves] you can't hire them back," Schniepp said. "You need those people; they have corporate memory. They are the ones who are going to stay."

Meanwhile, the nation's subprime mortgage meltdown is expected to have little effect locally. The number of those mortgages is less of a problem in Ventura County than elsewhere in Southern California, where such borrowing accounted for 27% of all home loans in 2006.

In Ventura County, roughly 15% of home loans were made last year to those with FICO scores of 620 or lower, down from nearly one in four loans in 2004.

By comparison, subprime lending in the Inland Empire accounted for 33% of home loans last year. In Los Angeles County, the number of such loans was 25%. Orange and San Diego counties reported 17% each.

But mortgage defaults -- meaning a homeowner who has been officially notified about late payment -- in Ventura County are at an all-time high. Defaults are also at record levels in Riverside, San Diego and Santa Barbara counties.

Despite uncertainty in mortgage markets and a falloff in home sales, the selling prices of homes in Ventura County have not fallen much so far this year, the report states.

According to the California Assn. of Realtors, the median price of a Ventura County home -- the point at which half of them cost more and half cost less -- was down just 3.2% in July compared with July 2006.

Two rival measurements, one from a unit of the U.S. Department of Housing and Urban Development and the other from a private company, have median prices down 4.3% in June and 5.8% in July, respectively.

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