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'Stubbornly sluggish' growth seen in 2013

San Diego County's growth will likely slow in 2013, especially if the federal government starts cutting the defense budget, according to a forecast released on Thursday by the National University System Institute for Policy Research.

Economic growth is projected to slow from an anemic rate of 1.7 percent in 2012 to a "stubbornly sluggish" 1.5 percent in 2013, slightly lagging the projected growth of 1.6 percent in California and 2 percent in the nation, the report says.

"While we would agree that the economy is healing, it is at best a maddeningly slow recovery," wrote economist Kelly Cunningham, who compiled the report. "(It's) certainly not the kind of robust expansion we should be experiencing in the fourth year of recovery."

At the heart of the growth projections is uncertainty over how federal budget cuts might affect the local defense industry. Cunningham says roughly 25 percent of the local economy depends directly or indirectly on federal defense expenditures, which are at risk as Congress debates how to pay down the national debt and avoid the "fiscal cliff."

"At least until greater certainty emerges in respect to federal spending, it seems imprudent to predict anything better than San Diego's defense economy treading water in 2013," Cunningham said.

Nevertheless, Cunningham predicted that hiring would rise slightly, from 18,000 in 2012 to 21,000 in 2013, although that only brings the county halfway toward recovering the jobs it lost during the recession. Among the brighter signs:

* Construction seems to be recovering after losing 40 percent of its work force during the recession. The report projects a 13 percent increase in homebuilding this year, prompting more construction hiring.

* Travel and tourism is staging a dramatic comeback, with jumps in attendance at attractions and events.

* Health care, administrative and technical services, which remained relatively strong even during the recession, will continue to grow.

But partly because of lingering gloom among consumers, retail sales will only inch up 4.7 percent, which gets whittled to 1.5 percent after adjusting for inflation, the report projects. Cunningham notes that one out of seven retail outlets closed during the recession. Even though 4,500 stores have since opened, the total is still 8 percent below the number that existed in 2006.

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