Steven C. Hackett

Cal Poly Humboldt

February 1999

Like many rural counties in the western United States, Humboldt county has been in a long-term transition from an economy dominated by resource extraction to a more diversified economy in which services are most prominent.

In the years following World War II, households in the United States experienced a dramatic increase in income. One consequence of this rise in income was a nation-wide housing construction boom, and lumber production in Humboldt county nearly doubled from 1949 to its peak in 1959. During the 1950’s, the lumber industry employed about one out of every two working people in Humboldt county, and accounted for more income than the rest of the county economy combined. Humboldt county residents shared in the national gain in prosperity -- per-capita personal income in Humboldt county during the 1950’s was comparable to those in the rest of California, and higher than the United States as a whole. Our county population rose by slightly more than 50 percent during this period.

The transition away from a lumber-dominated economy actually began in the early and mid-1960’s, before most environmental regulations were put in place. Even though total board feet of timber production in the 1960’s was roughly comparable to that of the 1950’s, lumber-based manufacturing employment fell to just over one-third of all County employment by the mid and late 1960’s. The services sector was the major source of increase in both jobs and personal income in the 1960’s. As the proportion of jobs in lumber-based manufacturing declined, so too did per-capita personal income. By the 1960’s, per-capita personal income in Humboldt County had dropped to national levels, and below state levels. County population actually shrunk during the 1960’s.

In recent years the sources of growth in the county economy have been services, retail sales, and state and local government. Services contribute nearly one-fourth of total personal income in Humboldt county. In contrast, since the end of the 1970’s, manufacturing has generated only about 12-15 percent of total county personal income, and by 1997 lumber-based manufacturing represented only 7.8 percent of overall county employment. Unfortunately, average earnings in the retail, services, and government sectors tend to be less than in manufacturing, and consequently per-capita personal income in Humboldt county is still only about 77 percent of that for California as a whole.

On the positive side, these trends have led to lower unemployment rates and a more stable economy. The lumber industry is especially hard hit by national and international recessions because of the cyclical nature of building and construction activity. Consequently our increasing economic diversity will result in less of a boom-and-bust cycle and more overall employment stability. Moreover, the number of employers in the County has risen by about 50 percent since the 1970’s, and there have been notable employment gains in retail trade, restaurants, medical services, legal services, and state government. Some of these service areas pay quite well. The number of people employed in the retail sector approximately doubled from the 1970’s to the 1990’s. The number of firms in the service sector increased by more than a factor of four since the 1970’s, and the number of jobs in the service sector rose from about 2000 in the late 1970’s to over 7000 in the 1990’s. In addition, the non-lumber elements of county manufacturing have become relatively more important, and now contribute about 25 percent of total manufacturing income.

The trends we have seen over the last 30 years should continue to generate modest economic growth in the future. Our beautiful natural environment will continue to attract tourists to Humboldt county, and growth in national population and income will increase the level of tourism activity. Likewise our natural environment, mild climate, and relatively affordable housing will continue to attract retirees from outside the county, and growing numbers of elderly residents will increase demand for personal and health services, as well as restaurants and retail. The telecommunications revolution will allow Humboldt county to attract more and more "cyber-commuting" professionals who have the flexibility to live where they want, and thus can bring their jobs with them to beautiful Humboldt county. Consequently one can see that protecting and restoring our natural environment is important to sustaining recent county economic trends. While our remote location makes it difficult to develop much of a large-scale manufacturing base, there is likely to continue to be growth in smaller-scale non-lumber manufacturing such as recreational equipment, crafted furniture, and food.

Biographical Information:

Dr. Steven Hackett is an Associate Professor in the School of Business and Economics, a member of the Environmental Science faculty, and serves as the Program Coordinator for Economics. He has published in a variety of different scholarly journals, including Journal of Law and Economics, Journal of Law, Economics, and Organziation, Journal of Environmental Economics and Management, and Economic Inquiry, among others. The second edition of his textbook, Environmental and Natural Resources Economics: Theory, Policy, and the Sustainable Society (M.E. Sharpe), will be available in March 2001. His research has been supported by the National Science Foundation and by the California Sea Grant College Program. He produces the monthly Index of Economic Activity for Humboldt County, which can be found on the Internet at (http://www.humboldt.edu/econindex).