Over the last several months, our work at EDC has had to move and change in some significant ways to respond to the economic conditions around us. And while this is always a part of our work and planning, it is safe to say that 2020—and the early stages of 2021—challenged us greatly and taught us a lot about our work and our economy, as it did all of you.
Investors and community partners often ask me what a day or a week at EDC looks like—some are just curious what the actual work feels like on a day-to-day basis; others are interested in knowing what we are seeing and experiencing through the businesses we work with to better understand if their needs and priorities may signal bigger or broader economic trends, challenges, or opportunities for the region.
As we kick off the third quarter of the year and begin developing new and improved programs, strategies, and focus areas to keep stride with our fast moving and re-opening economy, here’s a quick glance at EDC’s Q2 2021:
As always, we do all that we do with an eye on building a stronger, more inclusive economy, producing more skilled workers, creating more quality jobs within our small businesses, and establishing more thriving households and a better quality of life for businesses and residents in all corners of the San Diego region. We truly could not do any of it without you, and we thank you for your continued investment, leadership, and support.
Welcome to the third edition in EDC’s Changing Business Landscape Series, which will be published bi-monthly in the San Diego Business Journal and here on our blog. If you missed them, check out the March and May editions.
Surveying the changing business landscape in San Diego
The COVID-19 pandemic has impacted every facet of life, including how businesses operate. Companies in every industry are rapidly re-evaluating how they do business, changing the way they interact with customers, manage supply chains, and where their employees are physically located. This has massive immediate and long-term implications for San Diego’s workforce and job composition, as well as regional land use decisions and infrastructure investment.
To identify evolving trends in local business needs and operations, ensuring their ability to grow and thrive in the region, EDC is surveying more than 200 companies in the region’s key industries on a rolling basis throughout 2021 to monitor and report shifts in their priorities and strategies. In addition, EDC constructed the San Diego Business Recovery Index (BRI)—a sentiment index to measure companies’ perceptions of current conditions, as well as expectations for the future across several factors such as business development, employment and commercial real estate needs. (An index value >50 reflects expansion, and a value <50 reflects contraction. More information on the index and how it is calculated is available here.)
These insights will help inform long-term economic development priorities around talent recruitment and retention, quality job creation, and infrastructure development. Companies are surveyed on several topics, with varying emphases in each wave.
Here are three key findings from the third wave of surveying conducted in June 2021:
We are amid a great talent reshuffling. Businesses report increasing difficulty hiring and retaining talent, meanwhile the quits rate is at historic highs.
Supply chains remain knotted up. The strategic importance of our cross-border trade has never been clearer.
Space needs are in flux as companies prepare for return to office. Demand for office space may be waning, but life sciences companies are looking to add lab space.
San Diego County firms built on the enthusiasm expressed in April’s survey, with the BRI advancing from 58.9 in April to 63.7 in June. The topline index was pulled higher by more upbeat views of, both, present conditions and expectations for the future. The present conditions index segment rose from 56.1 in April to 59.3 in June while the expectations segment climbed from 65.4 to 73.9 during that time. Business respondents in the region confirmed several trends that have made headlines recently. Companies stated that business conditions have improved significantly over the past two months (due in no small part to California’s reopening in June) while also noting that sourcing talent and suppliers has become significantly more difficult.
A great talent reshuffling
Companies reported that revenues and earnings have improved since April and thus optimism over the next six to 12 months has increased. Expectations are also strong in San Diego’s Innovation cluster. Businesses in this group conveyed that they plan to hire more aggressively in the coming months. This is particularly good news, since each new Innovation job supports another two jobs elsewhere in the regional economy.
Nonetheless, companies also reported having a tougher time attracting new talent as well as increased difficulty retaining existing workers. There has been much ado about labor shortages and the impact of increased and extended unemployment benefits, but the data show that there is a much more nuanced story. First, there is a large mismatch between the talent in-demand and the talent available to work. As of May (most recently available data at time of writing), there were 104,400 people unemployed in the San Diego region and more than 115,000 job openings. However, the top hiring industries are Administrative and Support Services, Professional Services and Manufacturing industries (nearly 40 percent of unique postings), whereas the bulk of the unemployed come from Leisure and Hospitality.
Second, there are record numbers of workers quitting their jobs. The Bureau of Labor Statistics measures the proportion of workers who voluntarily leave their job relative to total employment. This “quit rate” sat at 2.5 percent in May 2021 after falling from 2.8 percent in April—the highest ever recorded. The Conference Board survey’s labor market differential, another measure of views on whether jobs are plentiful or hard to get, vaulted from 36.9 in May 2021 to 43.5 in June. That is the highest level since 2000.
All this quitting not only reflects confidence in the availability of work, but also the changing needs and desires of workers. The San Diego Association of Governments surveyed both employers and employees earlier this year and found that only 36 percent of employers expect to have one or more employees working from home at least one day per week. Meanwhile 44 percent of employees surveyed expect to work from home an average of 1.2 days per week. This difference in expectations partly reflects differences in opinion of how remote work has impacted productivity—only nine percent of employers reported increased productivity during the pandemic versus 48 percent of employees.
Flexibility will be key to keeping and attracting the best and brightest of workers. Perhaps the companies EDC surveyed understand this better than most, as they indicated both improved efficiencies from, as well as increased planned future utilization of, remote work technologies in June compared to April.
Investing in supply chains locally, binationally
Hiring challenges are also impacting supply chains globally. Companies reported a sharp decrease in the accessibility and reliability of their suppliers and vendors. Here, BRI fell from 54.7 in April to a categorical low of 26.5 in June. This corroborates the headlines regarding shortages in lumber and microchips, which has in turn stalled production of higher end goods and led to spikes in commodity prices and other item such as used cars. A lot of these supply chain disruptions are temporary in nature, directly linked to safety measures and restrictions associated with pandemic (this is why longer-term inflation expectations remain stable).
Ports and businesses across the country have experienced ongoing shortages of labor, containers, truck chassis, and more; shipping vessels have been forced to wait in harbors, in some cases for more than two weeks. This global traffic jam has impacted schedule reliability so profoundly it has forced companies to revisit the ways in which they manage risk. Many companies have moved from a just-in-time strategy to just-in-case. This means firms now keep additional inventory on hand, anything from raw materials to the final product. The lack of supply and rising costs have disproportionately impacted small and mid-market suppliers and buyers. This has resulted in direct capital investment from smaller buyers into smaller suppliers to stabilize supply chains and build necessary redundancies.
The pandemic-induced constraint on the movement of goods has only exacerbated trends from the past few years. Trade wars, changing consumer behavior, and e-commerce were already disrupting global supply chains, all of which has highlighted the strategic importance of supply chain management as well as the region’s bi-national assets. The Cali Baja Binational Mega Region is already vertically integrated in Manufacturing, and a warehousing boom in Otay Mesa is increasing capacity for goods coming via land and sea. Cali Baja is an ideal location for companies that want to move operations closer to home but maintain a binational advantage. Continued investment in trade infrastructure, such as our ports of entry and direct route service, will further cement Cali Baja as a binational innovation hub.
The return to office will be in a lab
Back in April, companies indicated a modest desire to increase their physical footprint upon returning to the office. However, companies appear to be less sure as the return approaches. In June, companies expressed plans for a net reduction of space, but a deeper dive into the responses reveals that it is demand for office space that is waning. In fact, there is increasing demand for commercial space—life sciences companies in need of laboratory space. This reflects the influx of investment and rapid hiring we are seeing in these industries, as they lead the fight against the global pandemic. Fortunately, there is nearly 10 million square feet of industrial and flex space across San Diego County currently available for lease or purchase that could potentially accommodate this demand. Current hot spots include Sorrento Valley, Vista, and Otay Mesa; Downtown San Diego is also building capacity rapidly.
The headline story is a positive one for San Diego’s economy, but sentiment is far from identical across business sizes and industries. For example, small companies with fewer than 50 workers logged BRI of 53, which is modestly in expansionary territory, while companies with 250 or more employees measured an index value of 63.7. This makes sense, because San Diego’s Leisure and Hospitality businesses tend to be smaller establishments and were the hardest hit during the pandemic. While companies are enthusiastic to get back to full capacity and add workers, it will likely take a few more months for supply chains and the labor market to normalize again. The pandemic is a generational disruption with widespread ramifications, accelerating several trends already underway, including how and where people are willing to work.
Stay tuned for more on San Diego’s changing business landscape. EDC will be back every other month with more trends and insights. For more data and analysis visit: sandiegobusiness.org/research.
Every week, ‘Good News of the Week’ (GNOTW) features a curation of positive headlines from across the San Diego mega-region, delivered straight to your inbox. A blend of aggregated stories from San Diego’s most trusted news sources and original EDC-created content, GNOTW provides a comprehensive recap of the region’s best stories from the past week.
Presented by Meyers Nave, this edition of San Diego’s Data Bites covers June 2021, with data on employment, housing, and more insights about the region’s economy. Key takeaways include an unexpected unemployment rate rise amid gains in Leisure and Hospitality.
As many companies begin to plan for a safe return to traditional offices, it can seem like there are more questions than answers. Attorneys Janice Brown and Sandy McDonough from EDC investor companiesMeyers Nave and Paul Plevin address some of the most common questions about returning to in-person work.
Presented by Meyers Nave, this edition of San Diego’s Data Bites covers June 2021, with data on employment and more insights about the region’s economy at this moment in time. Check out EDC’s Research Bureau for even more data and stats about San Diego.
KEY TAKEAWAYS
San Diego establishments added a middling 5,700 net new payroll positions in June, although revisions uncovered an additional 1,000 jobs in May. Gains in Leisure and Hospitality, Manufacturing, and Healthcare were largely offset by losses in Government, Professional and Business Services, Education, and Finance.
The unemployment rate unexpectedly jumped to seven percent from May’s 6.3 percent, according to a separate survey of household employment. However, this was driven in large part by 7,600 people either joining or rejoining the labor force last month, a positive sign for future growth.
Data suggest that enhanced unemployment benefits are not preventing workers from finding and taking jobs in San Diego.
First impression
San Diego establishments added a middling 5,700 net new positions in June, following a build of 3,000 (initially reported as +2,000) jobs in May. Leisure and Hospitality continued to lead gains with an additional 4,800 jobs last month, followed by Manufacturing (+2,000) and Healthcare and Social Assistance (+1,500). However, gains in those industries were largely offset by losses in Government (-1,600), Professional and Business Services (-800), Education (-500), and Finance (-500).
More surprisingly, the separate household survey indicated that the unemployment rate jumped from May’s 6.3 percent (initially reported as 6.4 percent) to seven percent in June. However, this was driven in large part by 7,600 people either joining or rejoining the labor force. This could prove to be a big positive for growth in the coming months, particularly since employers have been worried that there aren’t enough workers to fill open positions (more on that below).
The relatively ho-hum jobs report for last month may be a result of timing. The California Employment Development Department (EDD) surveys businesses and households during the week of the 12th of each month. However, California’s economy, including San Diego, didn’t reopen fully until the June 15, so jobs created after reopening may not show up until July’s employment report.
Are unemployment benefits preventing workers from finding jobs?
Nationally, a fiery debate has erupted regarding jobless benefits and the jobs recovery. On one side, many argue that unemployment insurance benefits, particularly enhanced federal unemployment benefits that came online as the pandemic bore down on the economy last year, are essentially “paying people to stay home” and preventing them from returning to work. Others argue that the story is more nuanced, and that other factors like access to childcare and health concerns have prevented many folks from returning.
So, what do the data tell us about San Diego’s job market?
To begin with, nearly 8,000 people entered or reentered the labor force last month, so it doesn’t appear that workers are waiting on the sidelines.
Also, job openings in the San Diego regionare on the rise and, in June, nearly matched their July 2019, pre-pandemic peak. More than 116,000 new jobs were posted last month, up 55 percent from April 2020’s nadir.
It’s important to note that, just like workers, jobs are not identical, so it’s crucial to understand which positions are being advertised and for which industries. Of the 248,000 jobs lost in the region between February and April 2020, 53 percent were in Accommodation and Food Services; Arts, Entertainment, and Recreation; and Retail. Unlike total job postings, which have essentially returned to pre-pandemic norms, postings in these three industries still rest 23 percent below their July 2019 peak. Moreover, postings in these industries only accounted for 13.6 percent of all new job openings from April 2020 to June 2021. This implies that the majority of job postings growth has been within industries that suffered far fewer job losses in the pandemic and therefore have fewer available workers to choose from, which better helps to explain why unemployment has not fallen faster in recent months.
Timing should also be considered. Leading up to the pandemic, it took a median 37 days for Accommodation, Arts, and Entertainment, and Retail companies to fill open positions. By June 2021, that number fell to 33 days (also challenging the claim that workers are engaging less with open jobs because of unemployment insurance payouts), but it still implies that it could take at least one to two months before those filled positions show up in the employment data.
Finally, of the more than 140,000 jobs recovered between April 2020 and June 2021, 85,500—or 61 percent—have come from Accommodations, Arts, and Entertainment, and Retail.
Taken together, the data suggest that workers in San Diego are eager to return to work and reestablish some sense of normalcy after more than a year of being dislocated. All told, worries over enhanced jobless benefits preventing people from taking new jobs appear to be overblown, at least locally.
Each month, World Trade Center San Diego delivers the latest global news and updates straight to your inbox. In July 2021, here’s what you need to know about San Diego’s global trade, investment, and engagement:
Through the Export Specialty Small Business Development Center at WTCSD, Funki Adventures secured nearly $10,000 in relief in EIDL and California Small Business COVID-19 Relief Grant funds. The funds helped Funki Adventures pivot to serve domestic customers and purchase enhanced cleaning equipment to keep the company open and operating safely. ➝ Read More
WTCSD recently convened its quarterly Global Competitiveness Council (GCC) to discuss supply chain disruptions due to COVID-19. While San Diego companies have a few more challenging months ahead, there is light at the end of the tunnel, especially in e-commerce. ➝ Read More
The Advancing San Diego (ASD) Internship Program launched in Summer 2020 in a remote-capacity amid the COVID-19 pandemic and aims to provide up to 100 San Diego-based companies with fully subsidized interns. This program targets companies with 100 employees or less, which comprise 98 percent of all businesses in San Diego, employ nearly two thirds of San Diegans, and account for 70 percent of job growth. A key issue for these companies has been a lack of time and resources to recruit the skilled talent necessary to continue their growth.
As students are closing out their Spring business internship experiences, EDC is rolling out this blog series to highlight the innovative local companies that comprise the third cohort of the program, and the interns they hosted. To date, ASD has placed 93 student-interns in local businesses, with $455,000 in total wages and support services paid.
In this feature, we sat down with Dominique Hernandez, intern at San Diego Loyal. As part of the third cohort of host companies, San Diego Loyal is a professional soccer club currently competing in the United Soccer League (USL) Championship. Hernandez is a rising senior at CSU San Marcos where she is studying business management.
Read on for more from Dominque.
Tell us about yourself.
My name is Dominque Hernandez and I am originally from Ventura County, California. I am currently attending CSU San Marcos where I am a captain of the women’s basketball team. As an academically-awarded student athlete for an NCAA DII Women’s Basketball Team, I was interested in a position working in the local sports industry. Thanks to ASD’s Internship Program, I was able to join San Diego Loyal as an operations management intern.
How has your experience in the Advancing San Diego Internship Program been, and what projects/assignments have been the most meaningful?
My experience in the ASD Internship Program has been amazing. It has allowed me to work with very knowledgeable and supportive individuals who are so driven in the work they do. This hands-on experience has been so important as I begin to navigate my career path. The most meaningful assignment thus far was being an Ambassador Manager. Here, I was responsible for 40+ individuals as we strived to create an optimal customer experience. Our 619 game consisted of 20 individuals from the SD Loyal Ambassador Program and 20 Sports-Management students from the University of Iowa. This experience highlighted the future impact I could have by helping individuals and creating the best work-environment, while also striving to be successful in the task as a customer-experience based team.
How has the COVID-19 pandemic affected your day-to-day, and what challenges have you faced as a student?
One of the biggest challenges I faced was the struggle of simultaneously balancing responsibilities from different aspects of my life. Because I was studying from home, I was asked to assist my family, all while taking 18 units and completing basketball workouts. My love for my family and desire to succeed encouraged me to take on all these responsibilities, but I soon realized that the biggest challenge was delegating tasks. Once I figured this out, things became less stressful, and I learned more about my ability to balance responsibilities in the different realms of my life. Because of this experience, I am now able to manage various tasks in my life while enjoying each experience.
What advice would you give to high school students looking for a successful career in the local software industry?
Connections are incredibly important to have. As my mom has been telling me for years, it is not what you know, it is who you know. While it is important to be a driven and hard worker, it is equally if not more important to have personal connections. I believe it is important to start those connections as early as possible, and when you do connect, leave a positive first impression. Start building your LinkedIn profile now, and connect with professionals whose roles you can see yourself in.
As many companies begin to plan for a safe return-to-work to traditional offices, it can seem like there are more questions than answers: Can companies require employees to be vaccinated? What if employees refuse to return to on-site work? The list goes on…
Below, attorneys Janice Brown and Sandy McDonough from EDC investor companiesMeyers Nave and Paul Plevin address some of the most common questions about the return-to-work in person. As COVID-19 restrictions ease and health guidelines permit, here’s what you should consider:
Please note: The information provided does not constitute and is not intended to be legal advice.
Can I require my employees to be vaccinated?
Yes, but consider your options.
The U.S. Equal Employment Opportunity Commission says an employer can:
Mandate that employees be vaccinated, and
Keep unvaccinated employees out of the workplace if the employer determines that the unvaccinated employee poses a “direct threat” due to a “significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation.”
Still, you’ll need to consider:
Medical accommodations
Religious accommodations
Business necessity
Team morale
MOUs (unions)
Possible objections based on vaccine’s Emergency Use Authorization status
What are my options if an employee refuses to return to work on-site?
First, work with your employees to understand the root of the issue. Is the refusal due to a lack of childcare? Is it because of safety concerns? Work with your employees to consider possible alternatives, like paid or unpaid leave and continued remote work arrangements.
What else should I know as our company outlines our return-to-work strategy?
Start by assessing your company’s needs, including updating key policies and plans, including a written COVID-19 prevention plan for return-to-work. Ensure you’re building trust with employees and lead with empathy by planning for accommodations, privacy, and health and safety needs—and communicate them accordingly. Once you have your plan, ensure the management team is trained to support.
Learn more about COVID-19 and return-to-work considerations:
Have additional or specific questions about the return to the office?Janice P. Brown (Meyers Nave) or Sandy L. McDonough (Paul Plevin) can help advise your employer.
Every week, ‘Good News of the Week’ features a curation of positive headlines from San Diego, delivered straight to your inbox. A blend of aggregated stories from San Diego’s most trusted news sources and original EDC-created content, GNOTW provides a comprehensive recap of the region’s best stories from the past week.
Get Good News of the Week in your inbox every Friday.→ Sign up
For the week of July 9, 2021, here’s what we’re reading:
Advancing San Diego: Apply now to be a Preferred Provider of Healthcare Talent!
EDC is accepting applications for Preferred Providers of Healthcare Talent. Education and training providers graduating top-quality medical assistants in San Diego County are invited to apply. The Preferred Provider designation qualifies students for access to paid work experience opportunities, and qualifies program staff for direct access to industry leaders.
Last month, World Trade Center (WTC) San Diego convened its quarterly gathering of the Global Competitiveness Council (GCC), an advisory group consisting of senior executives from many of San Diego’s most globally facing brands. This quarter, the discussion focused on the extraordinary, global disruption we have seen in the supply chain and logistics space amid COVID-19 and other factors.
The GCC welcomed the following industry experts to share their insights:
Eduardo Acosta, vice president, R.L. Jones Customhouse Brokers
David Adler, head of procurement and manufacturing, Cubic Corporation
David Arida, senior vice president, Dexcom
Leslie Oliver, director, global supply chain, Solar Turbines
Hyoduk Shin, Ph.D., professor of innovation and operations, UC San Diego Rady School of Management (moderator)
Trade wars and a pandemic constrained the movement of goods in the past few years, while changing consumer behavior, characterized by a record-breaking uptick in online sales, further strained the supply chain system. As a result, ports and businesses across the country have experienced ongoing shortages of labor, containers, truck chassis, and more, while ocean-going vessels have been forced to wait in harbors, in some cases for more than two weeks. This global traffic jam has impacted schedule reliability and forced companies to revisit the ways in which they manage risk.
A few takeaways from the session:
The pandemic has highlighted the strategic importance of supply chain in most organizations.
With schedule reliability down across the supply chain, many companies have moved from a just-in-time strategy to just-in-case, meaning firms keep a little extra in reserve, whether that be raw materials, final product, or anything in between.
Some mid-market players have been boxed out of getting raw materials and critical supplies by much larger multinational enterprises. This has forced those mid-sized players to source from a network of smaller suppliers to get what they need.
Some companies have supported their smaller partners in the supply chain by investing capital into them. This has de-risked the supply chain by offering stability to weaker links in the chain.
While companies will have at least a few more challenging months ahead, there is a light at the end of the tunnel and things may not look so bleak for the San Diego region in the years ahead. E-commerce is a long-term game and one that San Diego is well-positioned for. Cali Baja is already vertically integrated in Manufacturing, and a warehousing boom in Otay Mesa is increasing capacity for e-commerce goods coming via land and sea. The passage of USMCA, uncertainty from tariff trade wars, and recent reshoring/nearshoring trends have made this mega-region an ideal location for companies that want to move operations closer to home but maintain a binational advantage. By continuing to invest in trade infrastructure, such as our ports of entry and global connectivity, San Diego and the Cali Baja Binational Mega-Region can further cement itself as a hub for innovative firms and people.
We’ll continue these conversations with key partners across San Diego and Tijuana on July 29—check back here soon for details and registration.
Interested in growing your business internationally?
World Trade Center San Diego, home of the Export Specialty Small Business Development Center (SBDC) works directly with companies – free of charge – to help them expand internationally and grow in San Diego. Whether your small company is interested in learning about exporting and international growth, or your small or medium sized company is ready to export and grow internationally, World Trade Center San Diego is here to help.
Every week, ‘Good News of the Week’ features a curation of positive headlines from San Diego, delivered straight to your inbox. A blend of aggregated stories from San Diego’s most trusted news sources and original EDC-created content, GNOTW provides a comprehensive recap of the region’s best stories from the past week.
Get Good News of the Week in your inbox every Friday.→ Sign up
For the week of July 2, 2021, here’s what we’re reading:
Together with CCOE and Booz Allen Hamilton, EDC released the second study in a series—Securing the Future: AI and San Diego’s Cyber Cluster—which quantifies the economic impact of the region’s Cybersecurity cluster and explores the proliferation of AI and ML technologies being used to thwart cybercrimes, among other critical needs by the private sector and government.
