Another Strong Month, Where Are We Finding the Workers?
The highlights:
• The Bay Area added 4,900 jobs in July (seasonally adjusted), continuing the gains of recent months. State job growth rebounded in May, June and July and CA job growth now slightly outpaces the nation.
• The job growth in July was accounted for by gains in the San Jose metro area with no overall growth in the other metro areas.
• The regional unemployment rate was 3.0% in July the same as a year ago.
• With job growth far outpacing population and labor force growth, where are the workers coming from and can it continue? It did in July.
The Bay Area Continues to Outpace the State and Nation in Job Growth
Year over year job growth of 2.4% far outpaced the 1.6% growth for the nation and 1.8% gain in the state. The state once again is outpacing the nation.
The San Francisco metro area led the region in job growth over the past year followed by the San Jose metro area with slower growth in other metro areas.
Unemployment rates in July 2019 were similar to year earlier rates indicating that the decline in rates may be nearing an end. Unemployment rates in summer months are higher than in other months so the year over year trend is important.
Regional labor force growth in July was up 0.2% from the year earlier and is far below the 2.4% regional job growth.
Year over year job growth has remained in a narrow range since early in 2017. This occurred despite slowing population growth and rising outmigration in the face of high housing costs. In July 2019 year over year job gains remained near the top of the recent range.
The job growth is far higher than population and labor force growth and the year over year decline in unemployment was small.
If these numbers are real, the implication is a large increase in commuting into the region and/or a large increase with workers holding multiple jobs. Currently data does not exist to confirm or refute this possibility. Future months and possible data revisions will shed more light on where the workers came from to support the large regional job growth. It is an important question to answer.
Housing permit levels declined in the first six months of 2019. The probable causes are increasing construction costs and a shortage of labor. In most cases fees are due when the permit is approved giving another reason to delay taking out the permit even though the project is already approved.
There is some evidence that the surge in resale home prices has peaked though that is a separate market from the rental market and even more separate from funding and approval for BMR units. Median resale prices continue to be slightly below year earlier levels.
So the region will continue to struggle to find new workers as increasingly they will come from people moving to the region, which has become difficult given the housing shortage and high housing costs. The struggle to attract and house new workers will happen as 1 million Bay Area residents retire by 2030. Below is a link to the blog on this topic I wrote for SPUR.
https://www.spur.org/news/2019-01-17/how-retirement-wave-will-impact-bay-area-jobs-and-workers.
The region has reached the point where future labor force growth will need to come mainly from new residents and new housing. Higher levels of labor demand based immigration will be needed and transportation links from adjacent counties including a Central Valley to San Jose link would help.
The next needed steps involve lowering the cost of building new housing, changing zoning to allow more and less expensive housing to be built and, hopefully, state funding to offset some costs of housing. Perhaps the hardest challenge to overcome is the lack of affordable housing for middle income residents who are not eligible for subsidized housing even if it were available in sufficient quantity.
The bottom line, which should be understandable to Bay Area Council members, is that it is really hard if not impossible under current rules to build housing that is affordable to middle income residents yet pencils out for developers.
Readers can follow the ongoing local, regional (CASA) and state (SB 50 and other housing bills) efforts as the need for action becomes clearer each week.
SPUR published an estimate of the regional housing shortage at https://www.spur.org/news/2019-02-21/how-much-housing-should-bay-area-have-built-avoid-current-housing-crisis and has ongoing efforts in this area as does the Bay Area Council.