New retail, homebuilding perks up Merced economy

Three-quarters of the way through 2014, the year is looking like one of slow recovery and forecasters are predicting more improvements in Merced.

The year started with a number of notable retailers moving into town, which perks up the ears of other retailers, and home construction has increased after several years of little or no building.

“We’ve got some definite signs that show that things are starting to improve,” City Manager John Bramble said. “Clearly, we’d love to attract a couple of new employers.”

Merced County has an unemployment rate of 11.3 percent, according to the latest numbers from the Employment Development Department. The county added 3,400 jobs between July and August.

The additions of Chipotle Mexican Grill, Panera Bread and Harbor Freight Tools did more than just please shoppers and diners, Bramble said. Activity from such large retail chains puts a spotlight on Merced that generates interest from more corporations.

He said the city has received about 40 inquiries this year from businesses looking at the city, a high number compared with the eight or 10 the city saw when Bramble arrived in 2008. He attributed that increase to the collaborative effort involving the city, county and regional leaders.

Local retailers are also seeing improvements, according to Daniel Kazakos, president of the newly formed Merced Main Street Association. Also the chief executive officer for spa retailer Country Comfort, he said his business is up about 15 percent from this time last year.

“I think everybody’s doing better, all in all,” he said. “People are spending more.”

He said his business has been improving slowly, with sales creeping up since 2012. But it will take some time to climb back after Merced was hit so hard by the housing market crash, he added.

Empty downtown storefronts are starting to fill up again, he said, which is good news for neighboring shop owners.

The leveling out of the housing market and increases in construction also play a large role in the overall health of the economy, according to experts. Building provides jobs for contractors and workers, and eventually real estate agents.

So far this year, the city has issued 33 single-family homebuilding permits, up from just four last year and zero in the three years before that.

A 60-house development that covers more than 7 acres east of Highway 59 and south of Cardella Road continues. Another development is breaking ground even further north, according to Phillip May, president-elect of the Merced County Association of Realtors.

After several months of a housing market with low inventory, he said, the market is getting back to a healthy norm. “It’s a typical, traditional market,” he said.

There are about 265 homes on the market this week, he said. More sellers are putting their homes on the market, he said, because prices have risen to a profitable level.

UC Merced, which plans to grow from its 6,268 students to 10,000 by 2020, plans to have room for about 50 percent of the students enrolled. That leaves the other half looking for an apartment or house in the area, which could continue to spur construction.

In May, the University of the Pacific’s Business Forecasting Center in Stockton said homebuilding is poised to begin growing again soon. “We forecast significant recovery in housing starts in 2015 and 2016,” the forecast said.

A regional outlook by the center from September predicts that the Bay Area will continue to lead the state’s recovery, but the recovery is underway in the Central Valley as well.

The drought is having some impact on agricultural production and could reduce employment by about 1 percent in the San Joaquin Valley this year, the forecast said, but it is not large enough to stop economic recovery in the Valley.

With the exception of Sacramento, all metro areas in the San Joaquin Valley have job growth about a percentage point lower than in 2013. By 2015, job growth through the Valley will be back above 2 percent, according to the forecast.

Merced City Council has placed a few projects on its priority list that city leaders say could add jobs in town. Those include Campus Parkway, a stretch of highway to lead to UC Merced and past an industrial park, and plans related to so-called wet users, food production companies that use large amounts of water.

Food production jobs are the kind that many people in Merced can do.

Mayor Stan Thurston said the city’s economy is “quickly gathering momentum.”

He has met with developers and investors interested in building in Merced, although, he said, the housing market is still in a precarious position because builders are struggling to get banks to lend money for construction.

Thurston said he plans to approach the City Council on Mondaywith a list of other priorities that could create jobs. Among them, for example, is preparing University Industrial Park by hooking up its utilities and widening Highway 59 from 16th Street to Yosemite Avenue.

“I haven’t been this optimistic since I was first elected mayor,” he said.

This story was originally published October 3, 2014 at 7:18 PM.