Economy in crisis: Another round of uncertainty

The takeaways

  • A solid U.S. jobs report suggests that, in June, San Diego may have recovered as many as 45,000 of the jobs lost to COVID, more than half of which are from leisure/hospitality and retail.
  • The San Diego jobs recovery lags the nation’s somewhat as local businesses reopened later than those in other parts of the country.
  • Persistently high continuing UI claims in California, fresh business closures, and a shift in unemployment from temporary to permanent significantly cloud the near-term outlook.

The Good…

The U.S. job market took another big step forward in June, adding a better than expected 4.8 million payroll jobs. Last month’s report indicates that, in May and June alone, the U.S. recouped roughly 40 percent of the jobs lost to COVID-19. For context, it took the nation 17 months during the Great Recession of 2007 to 2009 to recover 40 percent of the jobs lost during that downturn. In addition, the unemployment rate slid lower to 11.1 percent from 13.3 percent the month prior (although the topline figure alone is misleading—more to follow on that below).

While San Diego’s job market doesn’t necessarily mirror the nation’s, the U.S. employment report can still provide valuable information on what to expect locally in a given month. Looking at the historical relationship for employment in San Diego and the U.S., it’s possible that San Diego may have added back about 45,000 jobs in June, more than half of which could be attributed to leisure/hospitality and retail. Combined with May’s gain of 18,200 jobs, this would mean that roughly 30 to 35 percent of the jobs lost from COVID will have been recovered. The slower pace of recovery compared with the U.S. as a whole can be partly explained by local retailers and restaurants reopening later here than in some other parts of the country.

If history is a guide, then the U.S. job numbers would imply an additional 18,000 to 20,000 leisure/hospitality positions, which would add up to roughly 20 percent of the jobs lost from February to April. In addition, the national figures imply a local recovery of between 7,000 and 8,000 retail positions, or about one in three jobs lost to COVID.

The addition of 7,000 to 8,000 retail jobs in June is slightly higher than our analysis of employment gains due to a rebound in U.S. retail sales that suggested San Diego retailers would add back closer to 6,000 to 6,500 jobs in June. However, the way by which national retail sales figures are averaged would have meant that the number of recovered local jobs could certainly be higher, making the estimate for 7,000 to 8,000 reclaimed positions not implausible.

…The Bad, and the (potentially) ugly

Unfortunately, other data points and recent events significantly cloud the near-term outlook.

Continuing claims for unemployment insurance in California, which are closely correlated to San Diego unemployment, have remained stubbornly high, increasing from an average of 2.83 million in May to 2.89 million in June. On its own, this would suggest a slight increase in the local unemployment rate from 15 percent in May to 15.2 percent in June.

In addition, state, county, and city officials have rolled back reopenings for bars, indoor restaurants, theaters, tasting rooms, and museums until the end of July, which could mean another round of layoffs will show up in the July employment report. The share of people testing positive for COVID-19 has increased from two to three percent for most of May and early June to six to seven percent. Moreover, the number of community outbreaks has reached double-digits in recent weeks, and the county reported more than 1,000 new cases over the Fourth of July weekend alone, prompting the closures.

Finally, despite the drop in the topline U.S. unemployment rate in June, the number of people whose unemployment shifted from temporary to permanent increased by nearly 600,000, bringing the number of permanently laid off workers to a six-year high. If a similar trend takes hold in San Diego, then the jobs recovery could take longer, because permanently laid off workers are more likely to become discouraged, drop out of the labor force, and lose valuable skills, making them significantly less likely to re-enter the job market. As such, it is crucial that these workers have ample access to job training to enhance their skills, keep them engaged, and increase the chances that the coming recovery leads to a more inclusive and resilient San Diego economy going forward.

Taken together, the June employment report—due out July 17—will almost certainly reveal solid monthly job gains. However, other indicators suggest that the labor market is unlikely to enjoy a smooth upward trajectory from here on out. The coming recovery is bound to be rife with bumps, hiccups, twists, and turns this year into next.

For more COVID-19 recovery resources and information, please visit this page.

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

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COVID-19 Survey Results: Anticipated impacts become reality, minority owned businesses hit hard, and workspace changes will continue

Earlier this year, we deployed a survey to assess the immediate economic impacts and evolving business sentiment in the wake of COVID-19.

To assess changes over time, we have deployed a follow-up survey with our partners at San Diego Regional Chamber of Commerce, San Diego and Imperial Small Business Development Center. The Downtown San Diego Partnership and National City Chamber of Commerce also served as survey partners. Information collected was from May 28 – June 8 and includes 194 valid responses.

Three trends stood out based on what employers told us:

  1. Anticipated revenue declines and staff reductions confirmed by businesses; 41 percent of businesses surveyed saw revenues decline by 81 to 100%, 93 percent saw  staffing declines of one to 50 employees.
  1. Minority owned businesses are hardest hit but may lead recovery. Long term, minority owned businesses anticipate continuing workspace changes (56 percent), teleworking (41 percent), offering online services (34 percent), and virtual programming and team building.
  1. Telework is here to stay, with 47 percent of firm surveyed reporting workspace changes to continue after the state of emergency is over.

Understanding COVID-19’s impact: an interactive visualization

Below is an interactive visualization of self-reported impacts to local employers, both in terms of employment and revenue. You can segment the data by industry, number of employees, and typical annual revenue. Additionally, please scroll over the tab to look at the breakdown of responses via zip code. Please note, this is not a representative sample – meaning we did not weigh responses operationally to the population and demographics of the region – so we strongly advise against drawing sub-regional conclusions from this data.

Survey Overview

The economic impacts of this crisis disproportionately affect the parts of our community that are disconnected from growth: communities of color and small businesses. The right recovery means focusing on efforts that benefit all San Diegans in this unique moment in time.

The overwhelming majority of firms surveyed (93 percent) were small businesses (fewer than 100 employees) and most (73 percent) had revenues of less than $1 million in 2019. Survey respondents were concentrated in the food and beverage, professional services, manufacturing, and retail industries.

Nearly 93 percent of firms surveyed saw their revenue decline, with most (41 percent) declining by 81 to 100 percent. However, more than one third expect revenues to return to 2019 levels in six to 12 months. The majority cut back on payrolls, with nearly 74 percent reducing staff hours and 60 percent reducing staff. The food and beverage industry had the most (19 percent) full time layoffs, followed by professional services (17 percent). Overall, most firms in all industries expect layoffs to be temporary, but 32 percent are still unsure. The uncertainty might be due to growing concern that the economy will fully reopen within the coming summer months, but a second wave in the fall will turn temporary layoffs into permanent ones.

Nearly 87 percent of firms surveyed applied for government (federal, state, or city) or private (company grants or bank loans) funding, and 70 percent who applied received funding. Firms that received private (company grants or bank loans) funding received more than $260,000 on average and firms that received government funding received more than $245,000 on average

Firms located in the opportunity zone represent 12 percent of survey respondents, or 24 businesses. In terms of access to capital, nearly 63 percent of firms located in an Opportunity Zone cited access to capital as a long term need in response to COVID-19, while 43 percent of all survey respondents cited access to capital as a long term need.

When asked about the changes a firm has experienced as a result of the pandemic, the top response was “scope of work”, which indicates firms are adjusting their business models and changing the range in which they operate in response to COVID-19. Unsurprisingly, in the short-term, businesses’ greatest needs are increased revenues and additional capital. While many businesses are unsure of the longer-term impact, they still anticipate needing capital and replacing staff.

Anticipated Revenue Declines and Staffing Reductions Confirmed

Most anticipated revenue impacts in the beginning of the COVID-19 pandemic were realized, even as reopening continues across San Diego County. More than 95 percent of businesses surveyed that expected their revenue to decline saw an actual decline in their revenue. Nearly 97 percent of businesses that expected their revenue to decline by 81 to 100 percent saw an actual decline of that amount.

Most anticipated staffing impacts in the beginning of COVID-19 pandemic were realized as well. More than 73 percent of firms surveyed who anticipated staff reductions actually reduced their staff. Most staff reductions were between 1 and 50 employees. More than 78 percent of those that anticipated staff reductions of one to 50 employees actually saw these reductions.

Minority-Owned Businesses

A new report shows that because minority owned small businesses have been disproportionately impacted by COVID, they may demonstrate how US businesses will ultimately adapt. These businesses are experimenting with new ways of working to ensure their employees’ safety, offering relief to employees and community members, and introducing new services. In San Diego, the top adjustments minority owned businesses made in response to the pandemic that are working well are workspace changes (56 percent), teleworking (41 percent), offering online services (34 percent), and virtual programming and team building.

There were 44 minority owned businesses that responded to the survey. Nearly all (98 percent) of minority owned businesses surveyed were small businesses with fewer than 100 employees. These businesses are concentrated in professional services, food and beverage, manufacturing, and retail – the industries hardest hit by COVID-19. The latest employment data shows that from February to June 2020, local retail, food and beverage, and professional services lost a combined 86,200 jobs. More than 90 percent of minority owned businesses have seen their revenue decline, with most experiencing steep revenue declines of 81 to 100 percent.

Workspace Future

In order to keep operating, many businesses have made changes to their physical workspace and/or are have employees working remotely. Firms surveyed expect to maintain these arrangements even after the state of emergency is lifted. Nearly 76 percent of firms surveyed report physical space as critical for operation, with most of those businesses in food and beverage, professional services, and manufacturing. Only seven percent of firms reported the pandemic has shown them that office space is unnecessary. Firms were split in regards to whether physical workspace will decrease, increase, or remain the same in the future.

Resources for you

San Diego Regional EDC, San Diego Regional Chamber of Commerce, and San Diego and Imperial SBDC offer a variety of resources to help businesses.

If you would like assistance from EDC, please use this form. Once we receive your responses, we will make every effort to reach out to you within 24 hours.

Request EDC assistance

If you are looking for general information about COVID-19, please view this page.

You can view last week’s COVID-19 survey results, as well as a full screen dashboard, here.

Economy in Crisis: Retail likely to rebound in June

San Diego’s May employment report roundly beat expectations. Against all odds, the region recovered 18,200 jobs lost during COVID-19. While this represents less than 10 percent of the 223,700 payrolls lost from February to April 2020, it’s still a promising sign that the local job market has turned the corner. Eating and drinking establishments, ambulatory healthcare, and construction each saw impressive rebounds in May 2020. Conspicuously absent from last month’s turnaround, however, was retail.

Clothing stores alone have accounted for more than a third of all retail-based layoffs, and nearly two in every three clothing store workers were let go from February to May. That is even more severe than the losses suffered by restaurants and bars, which cut nearly half of their staffs during the COVID outbreak.

Since February, retail jobs lost have totaled 24,000, with 300 workers let go in May. While May’s retail job losses aren’t alarming in the context of COVID, it indicates that the industry is yet to initiate a recovery.

GREEN SHOOTS

Nascent signs are emerging that retail’s long-awaited rebound moment has come. Locally, many shops reopened their doors to customers in June with modified social distancing protocols in place. This is similar to other parts of the country last month, leading to May’s record 17.7 percent jump in U.S. retail sales. Now that San Diego retailers have also reopened, it’s not unreasonable to assume a bounce back similar to May’s national retail sales figure could emerge locally in June.

An impact analysis that links local retail sales to employment suggests that if the same trends in the U.S. retail sales report were to play out here, we could expect a little more than 6,000 of the 24,000 retail jobs lost between February and May to be recovered in June alone. Sales at U.S. clothing stores rebounded an astonishing 188 percent in May. A similar spike in sales receipts in San Diego would be consistent with a June recovery of roughly 3,000—or two in five—of the 8,200 jobs lost at clothing stores from February to May. That is even more impressive than May’s 15 percent jobs rebound at eating and drinking establishments, and would bring the retail recovery more in line with other industries after a false start of sorts last month.

While this analysis is in line with the broader national trend, there are several caveats to consider.

First, the above only looks at one data point, which is a national sales report that may not reflect all of the idiosyncrasies of the San Diego retail industry. Additional data in the coming weeks, including June’s U.S. jobs report, will allow us to refine the estimates above.

Second, the 17.7 percent jump in U.S. retail sales reflects a weighted average of different—and potentially conflicting—regional trends. In other words, May’s rebound in retail sales may have been even stronger in newly reopened parts of the country than the topline figure of 17.7 percent would suggest. That is because the sales bump in those regions would have had to more than make up for steady or falling sales in other states like New York and California that hadn’t yet fully reopened.

Finally, any recovery could prove to be a false positive if thresholds are triggered that cause local, county, or state officials to pause or even walk back reopening.

Taken together, barring a spike in COVID cases, it looks like retail will finally join in the recovery. June’s employment report, which is due to be released on July 17, should ultimately confirm this. We’ll be reporting back on the health of retail and other industries as more data become available.

For more COVID-19 recovery resources and information, please visit this page.

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

Request EDC assistance

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San Diego’s Economic Pulse: June 2020

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Economic Pulse covers May 2020 and reflects some effects of the coronavirus pandemic on the labor market. Check out EDC’s research bureau for more data and stats about San Diego’s economy.

Unemployment Unchanged

The region’s unemployment rate was 15.0 percent in May, unchanged from a revised 15.0 percent in April, and far above the year-ago estimate of 2.8 percent. The region’s unemployment rate remains lower than the state unemployment rate of 15.9 percent, but higher than the national unemployment rate of 13.0 percent (not seasonally adjusted) during the same time period, respectively. Read more about EDC’s unemployment analysis.

Employment Bouncing Back

Between April 2020 and May 2020, total nonfarm employment in San Diego increased from a revised 1,290,800 to 1,309,000, a gain of 18,200 jobs. Overall, from February when the pandemic first began to May 2020, San Diego employment has declined by 205,500 jobs. In California, nonfarm employment decreased by 2.9 million in May from the month prior, and payroll employment increased by 2.5 million in the U.S. during the same time period.

Compared to a year ago, San Diego nonfarm employment declined by 195,800 jobs or 13.0 percent. In California, total nonfarm employment decreased by 2.3 million jobs, or 13.0 percent, from May 2019 to May 2020 compared to the U.S. annual loss of 17.7 million jobs, or 11.7 percent.

Sector Employment Slowly Returns

The leisure and hospitality industry accounted for the largest monthly gains, adding 7,900 jobs in May, primarily concentrated in food services and drinking places as restaurants began to reopen. While it is encouraging that the food services and drinking places sector has added jobs the last month, the industry has 40 percent fewer jobs compared to a year ago.

Educational and health services increased employment this month by 5,500 jobs, concentrated by 6,300 positions in health care and social assistance. Non-emergency health services added 5,800 of those positions, which accounts for roughly half of the jobs lost between March and April.

Construction followed with an additional 3,500 positions, and business/professional services recovered 2,500 of the 11,000 jobs lost between March and April. The bulk of the job gains in professional services came from administrative services, which includes temp help and employment services. This is particularly encouraging, as these types of jobs tend to become permanent over time and is an indicator of job growth in the relatively near future.

The accommodation industry continues to struggle with a monthly decline of 1,900 jobs, or 14 percent, in May. Accommodation industry employment has declined by nearly 64 percent from May 2019 to May 2020. While San Diego employment in accommodation is larger than many other regions, the job losses are in line with both San Francisco and Los Angeles Counties.

While job losses were not as extreme this month, clothing stores employment is about half its level from a year ago.

The largest monthly employment decline was in government, with a loss of 4,700 jobs, concentrated in state government — particularly state government education, which includes public colleges —and consistent with national trends.

As San Diego’s economy continues to reopen, current labor market trends provide a glimpse of the long-term effects on the economy. While some industries have brought back jobs, others are slower to recover. And while the May data brings some good news, it will take some time to recover from unprecedented levels of unemployment.

Economy in crisis: SD jobs report for May might not be as bad as initially feared

  • EDC projects SD unemployment to peak at around 16 percent in May, far less than externally produced estimates of 30 percent or more
  • While the U.S. recovered jobs in May, gains are most likely concentrated in states and cities that have reopened ahead of California
  • SD job growth will resume in the Summer months but could level off in the Fall until a vaccine is widely available

May’s employment picture might not be as bad as initially feared. A couple of weeks ago, we published a report that stated the May job cuts in San Diego could potentially be on par with the extraordinary losses suffered in April’s employment report. Those numbers were based on estimates for local retail sales along with city and county unemployment rates that were produced externally. While the estimates for more than a 50 percent decline in retail sales from February to May don’t seem unreasonable, it appears that the May unemployment rate projection of 30 percent or higher is well above the official rate to be reported by the Labor Department on June 19.

OUTLOOK IMPROVES ON INCOMING DATA

San Diego unemployment correlates closely with California continuing unemployment insurance (“UI”) claims. Continuing UI claims in California averaged about 2.9 million in May—above the 2.6 million registered in April, but certainly not enough to double unemployment across the state, including San Diego. EDC estimates that May unemployment in the region will be reported at closer to 16 percent, up from 15 percent in April and nearly half the rate estimated earlier during the pandemic.

EDC’s much lower unemployment projection is supported by incoming state and national data. For instance, the U.S. unemployment rate was reported as 13.3 percent in May, down from 14.7 percent in April. San Diego unemployment has differed from the national rate at times, but the probability that San Diego unemployment would have settled at a level at or above 30 percent given the lower national figure is, in essence, a statistical impossibility.

Additionally, the ADP national employment report showed that small business job losses slowed considerably in May from April. Small businesses employ 45 percent of the San Diego workforce, compared with just 29 percent nationally, suggesting that layoffs have abated for a wider swath of the local labor force than for the U.S. as a whole.

Taken together, the May jobs report for San Diego is anticipated to show an additional 10,000 to 15,000 job losses. While it would have been unfathomable to cheer on such a report just a few months ago, it is far less than the 150,000 to 175,000 job cuts implied by the 30 percent unemployment estimates produced earlier and also strongly suggests that the worst of the COVID slowdown has passed.

THE ELEPHANT IN THE ROOM

The May job cuts projected by EDC for San Diego may seem to contradict the official U.S. job figures released last Friday that showed 2.5 million job gains and a lower unemployment rate. However, the gains in the national report almost certainly reflect jobs that were recovered in states and cities that reopened ahead of California. San Diego has moved to reopen somewhat faster than other areas of the state. Even so, it would be surprising if local job growth is registered ahead of the June employment report, because the May employment figures were estimated on data received during the week of May 12, before local businesses began to reopen.

THE ROAD AHEAD

Barring a second wave of COVID-19, employment in San Diego is expected to start climbing again in June, but the region is unlikely to recoup the jobs lost since February for quite some time. Businesses will call back a sizable portion of their workers as they reopen, but a return to normal for the local job market won’t take hold until after a vaccine has been made widely available. After an initial bump in the summer months, job growth will likely continue at a much more measured pace until consumers begin to feel comfortable venturing out into larger crowds and businesses can once again operate at full capacity—something that most likely will not happen before 2021.

For more COVID-19 recovery resources and information, please visit this page.

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

Request EDC assistance

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Economy in crisis: More disappointing numbers to come, but the worst is likely behind us

We’ve seen and heard the unemployment numbers. But what does all of this really mean for our economic recovery in San Diego? Welcome to the ‘economy in crisis’ series – a bi-weekly breakdown of data at the national, state, and local level in the shadows of COVID-19.

10 YEARS OF JOB GROWTH LIKELY UNDONE IN 10 WEEKS

As expected, April’s jobs report was one for the record books. San Diego lost some 195,000 jobs, with especially steep cuts seen in accommodation & food services and retail as stay-at-home orders to curb the spread of COVID-19 essentially halted foot traffic to local restaurants, bars, music venues, and shops. Unemployment hit a historically high rate of 15 percent. March’s numbers were revised lower to reveal 10,400 fewer payroll jobs, bringing the total number of losses to 205,400 compared with the initial March estimates and roughly in line with our call for losses of about 230,000 jobs last month.

The April jobs report only measured employment as of the week of April 12, which means any additional job losses during the second half of April and first half of this month won’t be picked up until the May employment report due on June 19. Weekly unemployment estimates from Applied Geographic Solutions (AGS) indicate that unemployment in San Diego County may have been as high as 30.1 percent for the week ending May 9, with some zip codes in and around downtown potentially experiencing jobless rates of more than 40 percent. This is well above the U.S. estimate of 22.75 percent provided by AGS and implies that the May report could show an additional 10 to 15 percentage point climb in the unemployment rate from April.

Weekly retail sales estimates compiled by the San Diego Association of Governments (SANDAG) reveal a 43 percent reduction in receipts by San Diego retailers in April. Further, SANDAG anticipates a cumulative reduction in retail sales of more than 50 percent in May compared with pre-COVID sales levels—not an unreasonable assumption given the wide-ranging impact of stay-at home orders on retailers since March. If realized, the SANDAG retail sales forecast for May could mean another 70,000 to 75,000 job losses at retailers in the May employment report, even accounting for steady or growing receipts at supermarkets, bargain clubs, and drug stores. Taken together, if AGS’ unemployment estimates are accurate and SANDAG’s retail sales projections come to fruition, the May jobs report may reveal another round of record-breaking job losses similar to those reported for April.

LIGHT AT THE END OF THE TUNNEL

But there’s some good news: the worst has likely passed. With the City and County moving to gradually reopen the economy, businesses that have been able to hold on this long will likely be able to make it to the other side without having to initiate additional mass layoffs, at least not on the scale seen so far. The pace of initial jobless claims in California remains elevated but has slowed considerably. Now the focus will be on assessing continuing jobless claims, since those will indicate how many people have been able to get back to work.

The next great hurdle will be replacing lost jobs, especially for workers whose former employers were forced to shut down in the wake of the outbreak. This will require a balance between new businesses forming and targeted worker training programs to help connect people who are out of work with companies in higher-paying, more stable fields who are struggling to source employees. It could take several years before San Diego businesses lost during the COVID crisis are replaced, and worker retraining could get the workforce back on track much more quickly.

Of course, this would require public funding, which is scarce after several waves of fiscal stimulus. However, it would likely cost less to train employees and get them back into the workforce quickly than the amount of foregone income tax revenues, additional unemployment expenditures and longer-term government welfare programs that would be required as they wait for positions in their pre-COVID fields to open back up. Additionally, it is in the region’s best interest to get people back to work as quickly as possible, because job skills erode quickly as workers remain out of the workforce, which dramatically lowers their odds of ever re-entering the job market.

COVID-19 RECOVERY RESOURCES

As a partner of the local San Diego and Imperial Small Business Development Center, EDC is working directly with small businesses – free of charge – to counsel them on accessing COVID-19 recovery resources.

Request EDC assistance

For general COVID-19 recovery resources and information, please view this page.

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San Diego’s Economic Pulse: May 2020

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Economic Pulse covers April 2020 and reflects some effects of the coronavirus pandemic on the labor market. Check out EDC’s research bureau for more data and stats about San Diego’s economy.

Unemployment Skyrockets

The region’s unemployment rate was 15.0 percent in April, up from a revised 4.2 percent in March 2020, and above the year-ago estimate of 2.9 percent. During the 2009 recession, unemployment peaked at 11.1 percent in January 2010 and again in July 2010. The region’s unemployment rate remains lower than the state unemployment rate of 16.1 percent, but higher than the national unemployment rate of 14.4 percent during the same time period, respectively.

Employment Declines More than the Great Recession

Between March 2020 and April 2020, total nonfarm employment in San Diego decreased from 1,494,000 to 1,299,400, a loss of 195,000 jobs. For context, during the 2009 recession, the largest monthly non-seasonal job loss in San Diego was between June 2009 and July 2009, with 22,900 jobs lost, and the local economy lost a total of 119,000 jobs from Dec 2007 to Jan 2010. Put differently, more than 25 months of job losses occurred in San Diego in April alone because of COVID19. The month-over-month job losses are consistent with record-breaking state and national trends. In California, nonfarm employment decreased by 2.3 million in April from the month prior, and payroll employment declined by 20.5 million in the U.S. during the same time period.

According to the Bureau of Labor Statistics’ Current Population Survey, over 78 percent of all unemployed Americans in April reported being “on temporary layoff.” On the surface, this could mean that a sizable portion of those laid off will be able to get back to work in relatively short order. However, with many retail and food service businesses reopening at only partial capacity, the return to work may be longer than expected, and some who reported being on temporary layoff may ultimately be laid off permanently.

Compared to a year ago, San Diego nonfarm employment contracted by 199,200 jobs or 13.3 percent. In California, total nonfarm employment decreased by 2.3 million jobs, or 13.4 percent, from April 2019 to April 2020 compared to the U.S. annual loss of 19.4 million jobs, or 12.9 percent.

Sector Employment Suffers

Every one of San Diego’s 11 industry sectors lost jobs in April. Leisure and hospitality accounted for the lion’s share, shedding 96,200 payroll positions, or nearly 50 percent of its workforce. Within the leisure and hospitality sector, accommodation and food services lost 80,700 jobs, or 49 percent. California similarly saw widespread layoffs. Similar to San Diego, in California, leisure and hospitality posted the largest contraction at 866,200, which was more than double that of trade, transportation, and utilities, which gave up 388,700 payroll positions. This was also true nationally: job losses were spread across every industry, but cuts were especially severe in leisure & hospitality, which gave up some 7.7 million positions.

Retailers reduced employment by 20,300, or 14.3 percent in April, with the largest employment decreases in clothing and department stores. SANDAG estimates a potential loss of taxable retail sales of 53 percent in May, assuming a 3-month disruption from COVID19. This implies more retail job cuts could be on the way in the May employment report.

Understanding the ongoing economic damage caused by COVID19 can be daunting, as the numbers involved are often so far out of scale with the rest of historical data that it is difficult to even contextualize what they mean. Overall, COVID19 has accelerated unemployment and job losses at a level unheard of.

Economy in crisis: April jobs reports likely to reveal record SD job losses

We’ve seen and heard the unemployment numbers. But what does all of this really mean for our economic recovery in San Diego? Welcome to the ‘economy in crisis’ series – a bi-weekly breakdown of data at the national, state, and local level in the shadows of Covid-19.

A Record-setting jobs report

Incoming data confirmed what most of us already knew: The U.S. economy lost a record number of jobs in April. The Bureau of Labor Statistics (BLS) reported that the economy shed 20.5 million payroll jobs, lifting the unemployment rate to 14.7%, a rate unseen since the Great Depression. Job losses were spread across every industry, but cuts were especially severe in leisure & hospitality, which gave up some 7.7 million positions.

The BLS data are roughly consistent with payroll processor ADP’s employment report that shows 20.2 million job losses at private companies last month. Similar to the BLS, ADP reported that cuts were heavily concentrated in leisure & hospitality. ADP also measured employment changes across different firm sizes, and showed that companies employing fewer than 50 workers let go of 6 million workers in April.

SDREDC bart chart shows small firms experienced largest job losses in April 2020

What the U.S. numbers could mean locally

The crater in small business employment across the U.S. last month could portend an especially bad jobs report locally. Businesses with fewer than 50 workers employ 45% of San Diegans, compared with just 29% nationally. Job losses on the scale of the national figure would imply roughly 120,000 fewer payrolls at San Diego small businesses in April alone, roughly the same number of jobs lost across businesses of all sizes between December 2007 and January 2010 during the last recession.

Cutting the data across industries is equally disarming. Accommodation & food service companies employ about one in every 10 local workers. Both the BLS and ADP reports show that hospitality businesses essentially halved their staffs last month; a similar contraction in San Diego would translate to about 85,000 to 90,000 lost jobs. However, San Diego hospitality employment has historically been more sensitive to downturns than nationally, meaning as many as 120,000, or nearly two in three, hospitality workers may have potentially been put out of work.

Retail employment is also touchier to fluctuations in the local economy than it is nationally. San Diego retailers may have eliminated more than 25,000 payrolls based on the 2.1 million jobs cut across the U.S. last month.

The damage doesn’t end with hospitality and retail, although losses in other industries are not nearly on the same scale. The BLS reported 980,000 public sector job cuts, and local government, which employs public school teachers, accounted for 801,000 of those. Another industry with a large local footprint—professional and technical services—gave up 520,700 positions nationally. Together, an additional loss of around 15,000 local payrolls from these two sectors could be reasonably estimated based on historical relationships between local and national employment changes.

All in, San Diego is looking at a potential loss of about 230,000 jobs in April if history serves. This would be nearly double the losses suffered during the 2008-2009 crisis and could potentially bring the unemployment rate up to a range as high as 18% to 20%. The official April jobs numbers for San Diego will be reported on Friday, May 22.

Several points bear mentioning: First, the above discussion is only meant to provide a sense of scale around local job market impacts if similar dynamics seen in the national employment report were to play out here. Second, no sector or cluster is immune to downturns. So, while government and professional services haven’t yet experienced losses on the scale of accommodation & food services, there’s always a chance that the effects of COVID-19 could ripple out into these industries. Finally, while it may be encouraging that higher-paying professional and government positions haven’t given as much ground as lower-paying ones, the disproportionate pain experienced by the most vulnerable workers should give us pause.

The coming recovery presents an opportunity to establish career development programs designed to connect lower-paid workers with jobs in industries that are struggling to attract talent. EDC’s Advancing San Diego program – which is currently recruiting local educational providers that develop skilled engineering talent – is helping San Diego inch closer to its goal of producing 20k additional skilled workers per year.  Programs like this are a win-win situation that promises a brighter future for thousands of San Diegans and a more resilient economy that could better weather future downturns.

COVID-19 RECOVERY RESOURCES

As a partner of the local San Diego and Imperial Small Business Development Center, EDC is working directly with small businesses  – free of charge – to counsel them on accessing COVID-19 recovery resources.

Request EDC assistance

For general COVID-19 recovery resources and information, please view this page.

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Economy in crisis: SD job market rout continues, but opportunities emerge

We’ve seen and heard the unemployment numbers. But what does all of this really mean for our economic recovery in San Diego? Welcome to the ‘economy in crisis’ series – a bi-weekly breakdown of data at the national, state, and local level in the shadows of Covid-19. 

San Diego’s economy remains on hold as efforts to contain the COVID-19 virus continue. Roughly 3.5 million Californians have filed for unemployment benefits since March, comprising 13% of the US total. The number of active unemployment insurance claims in California is already triple the peak experienced during the 2008-2009 Great Recession, and it’s likely that the unemployment rate in San Diego will easily surpass the 11.1% peak reached during that time.

The job market rout is yet to be captured in the official employment data. According to the most recent jobs report, San Diego shed just over 10,000 jobs in March. However, last month’s employment numbers understate the full extent of job losses.

The impact on vulnerable local industries has been studied and documented. However, industry disruptions beyond arts & recreation, retail, wholesale, and accommodation & food services are becoming apparent. Oil and energy-related companies and non-emergency healthcare providers have shared in the pain.

Businesses with strong ties to oil have only a small footprint in the region, so the steep slide in crude prices in recent weeks is not likely to reverberate too loudly throughout the local economy. However, the healthcare industry runs fairly deep, accounting for roughly one in 10 local jobs. Hospitals and doctors’ offices—which are in high demand as the number of Coronavirus diagnoses has increased—employ between 60,000 and 65,000 people, but that still leaves well over 100,000 at-risk positions. Moreover, an estimated 460 additional jobs are lost in other sectors for every 1,000 jobs lost in non-emergency healthcare. Making matters worse is that employment estimates are notoriously unreliable during times of stress, and it could take months of data revisions before an accurate picture of the job market emerges.

building a stronger, more inclusive San Diego

Despite the immense pain and stress this downturn has caused, the coming recovery presents a prime opportunity to rebuild San Diego’s economy in a more inclusive, equitable way. A path can be built to link workers to training programs to prepare them for careers in industries that are struggling to fill open positions that pay considerably better and typically provide benefits. For example, health diagnostics and treatment occupations accounted for six times the share of job postings than total hires between 2016 and 2020, implying a severe shortage of qualified applicants. This is not isolated to just STEM-based positions, either; a similar trend has emerged for advertising, marketing, promotions, public relations, and sales managers.

According to Emsi, there was a 21% reduction in job postings over the past 30 days, including for the high-demand occupations listed above. Company hiring – or job postings – is expected to fall further before the crisis ends.  By looking at the imbalance of labor demand in the market, we can help shepherd workers toward occupations struggling to find talent. When viewed through a demand lens, we can take a targeted approach to develop training programs that may leave thousands of San Diegans better off than they were before the COVID-19 outbreak.

An Opportunity for Small Business Success

This recovery will also provide a chance to focus on small business formation and success among women and people of color who, historically, have been marginalized and received less access to startup capital. Nearly 96% of San Diego companies employ fewer than 50 workers and 61% employ fewer than 10 people, making this an especially important initiative to undertake.Pie chart of SD small businesses by number of employees

The “when” of the recovery remains a huge question mark, but the “how” of the recovery is coming into focus. EDC’s mission is to maximize prosperity within the region, and the opportunity to build a stronger, more resilient San Diego has arguably never been better than it is right now.

COVID-19 Recovery Resources

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance

Request EDC assistance

For general COVID-19 recovery resources and information, please view this page.

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San Diego’s Economic Pulse: April 2020

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This analysis covers March 2020 and reflects some—but not all—of the early effects of the coronavirus pandemic on the labor market. The San Diego jobs report estimates conditions in the job market as of the week of March 12. However, many of the actions taken to slow the spread of the coronavirus took place during the second half of the month, so the full extent of the impacts to the labor market are not apparent in the most recent report.

EDC’s COVID-19 Business Survey Analysis shows that the impacts of the COVID-19 outbreak on San Diego’s economy are severe, concentrated, and disproportionally affect small businesses and low wage workers. These results are corroborated by skyrocketing initial claims for unemployment insurance, both nationally and in California. While this is not fully reflected in the March employment data, it implies a dismal April jobs report should be expected along with downward revisions to the advance March estimates.

A Developing Picture

The region’s unemployment rate was 4.1 percent in March 2020, up from a revised 3.2 percent in February 2020, and above the year-ago estimate of 3.5 percent. The region’s unemployment rate remains lower than both the state and national unemployment rates of 5.6 percent and 4.4 percent, respectively. According to EDC’s survey of businesses, 75 percent of San Diego businesses plan to furlough employees, lay off employees, temporarily shut down operations, or permanently close. As firms decrease their workforce, unemployment insurance claims have spiked to historically unprecedented levels.

Between February 2020 and March 2020, total nonfarm employment in San Diego decreased from 1,514,500 to 1,504,400, a loss of 10,100 jobs. The month-over-month job losses are consistent with state and national trends. In California, nonfarm employment decreased by 252,000 from 19,516,000 to 19,264,000 in March from the month prior, and payroll employment declined by 701,000 in the US during the same time period. While the numbers have been eye-opening, it is likely that the data will continue to deteriorate substantially in the April and May job reports before any turnaround takes hold.

Initial claims for unemployment insurance have skyrocketed across the US in recent weeks. New filings for unemployment in California topped a million for the week ending March 28, eclipsing the previous record of 115,000 claims before the COVID-19 outbreak. Initial claims “eased” somewhat to 918,000 in the week ending April 4 and to 661,000 for the week of April 11. According to EDC’s survey of businesses, 388 employers plan to eliminate 14,844 jobs; nearly 69 percent of their workforce. Nearly all expect those reductions to happen immediately or within the next 30 days.

Compared to a year ago, San Diego added 13,000 new payroll jobs or 0.9 percent. Year-over-year employment gains in San Diego are consistent with, both, the state and national employment growth rates of 0.9 percent and one percent, respectively.

Unexpected Immediate Impacts

Surprisingly, professional and business services and construction accounted for the bulk of job losses, shedding 3,700 and 3,400 payroll positions respectively. Similar to the national trend, government led all industry sectors in month-over-month San Diego job gains, adding 1,200.

The industries in San Diego most vulnerable to the effects of policies aimed at containing the spread of the virus include arts, entertainment, and recreation, accommodation and food services, wholesale trade, and retail. Together, these industries accounted for about one in four local jobs and $18.5 billion in salaries and wages in 2019. Given the deep roots of those industries in the local economy, the ripple effects of job losses are expected to be significant: for every 1,000 jobs lost in retail, wholesale, the arts, or food services, an estimated 500 jobs would be lost in other industries across San Diego.

Between February 2020 and March 2020, employment in these most vulnerable industries dropped by 600, or 0.2 percent. While wholesale trade, retail trade, and accommodation and food services recorded job losses, the arts, entertainment, and recreation industry reported a small gain of 100. Job cuts in these industries were concentrated in wholesale trade, which let go 1,100, or 2.3 percent, of its workers.

These reductions (0.2 percent) are less severe than both the state and national employment declines of 1.6 percent and 1.3 (0.7 unadjusted) percent, suggesting the full scale of the impacts is yet to be captured by the data. Looking at food services, for example, if San Diego experienced the same monthly decline in sales as the US (26.5 percent), we should have seen sales drop by approximately $32 million and more than 3,200 jobs lost in those industries alone. Our survey of San Diego businesses shows they anticipate even larger revenue declines than what is contained in the US retail sales report. The bottom line is that the full extent of the damage incurred by the local job market is unlikely to be revealed for at least several months.

Please remember that EDC is here to help during these extraordinarily difficult times and that we are all stronger together. For general COVID-19 recovery resources and information, please view this page.