San Diego’s Data Bites: September 2021

Presented by Meyers Nave, this edition of San Diego’s Data Bites covers August 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

  1. San Diego establishments added a less-than-stellar 5,300 jobs in August, undoing July’s seasonal loss. Gains were concentrated in Construction and Government as teachers and school staff were brought back onto payrolls in preparation for kids’ return to the classroom.
  1. The unemployment rate dipped to 6.6 percent in August from July’s 6.9 percent. However, this was due to 11,800 people leaving the workforce, not job gains.
  1. August’s employment report provides more evidence that emergency federal unemployment insurance (UI) benefits are not sidelining workers, contrary to popular belief. Yet the data do point to another potential reason: workers are refusing to return because of the risk of exposure to COVID amid low pay and no healthcare benefits.

The data

San Diego companies added an underwhelming 5,300 jobs in August, while the exit of 11,800 workers lowered the unemployment rate to 6.6 percent from July’s 6.9 percent. August’s jobs build erases July’s loss, but the region still lags behind the national jobs recovery. Just over half of the jobs shed during the pandemic have been recovered locally, compared with about 80 percent nationwide.

Public agencies led the charge in August, adding 3,500 positions as teachers and school staff were brought back onto payrolls as kids prepared to return to the classroom. Construction came in at a close second, adding 3,400 jobs last month. However, Leisure and Hospitality, which has led job gains for nearly all of the recovery, added just 2,000 payrolls, potentially reflecting a change in preferences and attitudes among workers (more on that below). Transportation, Warehousing, and Professional and Business Services added another 600 jobs combined.

Gains in those industries were partially offset by losses in Other Services (gyms, salons, building and grounds maintenance, etc.), Finance, Wholesale Trade, Manufacturing, Retail, Healthcare, and private Educational Services.

Exposure, health insurance, and the jobs recovery

August’s employment report provides more evidence that UI benefits are not sidelining workers, contrary to popular belief. The line of thinking has been that an extra $300 per week in federal UI benefits is substantial enough for lower-paid workers in service industries to not return to the workforce. However, those emergency UI benefits terminate in early September, so the expectation would be for thousands of idle workers to return as the UI windfall is rolled off ahead of that.

To be sure, $300 per week amounts to just less than half of the gross pay received by workers in San Diego’s Leisure and Hospitality sector. Yet, Leisure and Hospitality establishments added a mere 2,000 net positions last month with another 33,200 jobs yet to be recovered.

The data may not support the notion that UI benefits are keeping workers home, but they do point to another potential reason: workers are refusing to return because of the risk of exposure to COVID amid low pay and no healthcare benefits. San Diego COVID cases, including the Delta and Mu variants, have fallen since peaking in mid-August, thanks to the County’s high vaccination rate, but they nonetheless remain higher than levels seen in May and June of this year. Many workers in lower-paying, public-facing positions may have therefore concluded that going back to work at $15 per hour isn’t worth the risk of exposure, even if it means forfeiting an extra $1,200 per month in federal UI benefits.

The San Diego region is yet to recoup 107,900 jobs lost during the pandemic, 60 percent of which are in industries that are either public-facing or have limited capacity for social distancing, such as Leisure and Hospitality, Retail, Education, and Manufacturing. However, most of these industries are closing in on pre-pandemic employment levels, while Leisure and Hospitality is not.

A combination of steady job growth and the rollout of health insurance mandates through the Affordable Care Act significantly reduced the number of uninsured San Diegans during the 2010s. Even with the expansion of insurance coverage, however, EDC estimates that anywhere from 11,000 to 17,000 people have been left without any health benefits since February 2020 as their jobs evaporated or they left the labor force.

Worse, many can’t even rely on getting jobs for health coverage. Nearly 10 percent of employed people in San Diego still lack any sort of health insurance; that number jumps to 16 percent for food preparation and serving-related positions at restaurants and bars and climbs as high as 29 percent for building and grounds maintenance positions. But those figures also include public insurance. Excluding public insurance options, some 54 percent of food prep workers and servers and 60 percent of building and grounds workers receive no health insurance through their employer or union.

Estimates for average hospital costs associated with COVID-19 treatment range from $30,000 to $50,000. A Kaiser Family Foundation study also found that 72 percent of major health insurance plans across the U.S. have already stopped full coverage of COVID-related treatments, and that will increase to 93 percent by year-end. Meanwhile, the average annual salary for food prep workers and servers in San Diego is $29,500. Hence, being infected by COVID or one of its variants could easily spell financial ruin for these workers even if they already have health coverage. Faced with those statistics, it would be more financially irresponsible to return to work than to stay home and wait out the recent spate of COVID infections.

Taken together, it’s safe to assume that many lower-paid service workers in public-facing jobs may not return anytime soon until the benefits clearly outweigh the risk. This puts low-margin local businesses in service industries in a precarious position: either lure workers back with higher pay and/or benefits and pass on the additional costs to customers, or run the risk of operating at less than 100 percent capacity, which would crimp revenues and also hurt bottom lines.

Regardless of the answer to that question, these data underscore the desperate need for more quality jobs in the area, particularly at smaller companies, if we ever hope to restore a sense of normalcy in the job market going forward. Humans may be creatures of habit, but large-scale economic displacement has a way of fundamentally altering our preferences and routines. The pandemic-fueled recession last year has almost certainly led workers to place greater importance on their personal safety and health than before, and employers will need to adapt in order to attract and retain talent.

Interested in more? You may also like to read:

San Diego’s Data Bites: August 2021

Presented by Meyers Nave, this edition of San Diego’s Data Bites covers July 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

  1. San Diego lost a net 7,800 payroll jobs in July, but this is largely due to seasonal fluctuations. Public and private educational services employment dropped by 16,200 as teachers and staff break for summer. Barring those losses, payrolls grew by 8,400, led by a build of 6,100 positions at Leisure and Hospitality establishments.
  1. The unemployment rate ticked lower to 6.9 percent from June’s 7.0 percent even as an additional 16,100 workers joined or rejoined the labor force last month. The labor force has grown by more than 24,000 people since June, further debunking the assertion that workers are sidelining themselves amid extended emergency federal unemployment benefits.
  1. Recent data on COVID cases have been flashing red, but there’s good reason to believe that San Diego will not suffer as badly as other regions across the country where fewer people have been fully vaccinated. Additionally, the data clearly support the idea that the region’s recovery hinges in large part on how many more San Diegans get the vaccine in the coming weeks.

The data

San Diego establishments shed 7,800 jobs in July, primarily the result of seasonality. The vast majority of job losses came from public and private Educational Services as teachers and staff began summer break and durable goods Manufacturing as factories undergo annual retooling. As such, job losses in July are common and not unexpected, and it’s worth noting that last month’s losses were less severe than in prior years leading up to the pandemic.

Local Government Education (K-12 schools), State Government Education (colleges and universities), and private Educational Services gave up a combined 16,200 positions, leading the region’s losses for the month. Meanwhile, durable goods Manufacturing employment fell by 1,100.

On the bright side, Leisure and Hospitality continued to lead job growth, adding 6,100 jobs in July, followed by an additional 2,800 Construction jobs.

Notwithstanding last month’s minor setback, employment is up 4.5 percent from a year earlier, another positive indication that San Diego is restoring jobs lost during the COVID pandemic. In particular, Accommodation and Food Services employment, which was hit the hardest during the pandemic, has jumped 36.7 percent compared to July 2020.

What about COVID?

Recent headlines have focused largely on the “fourth wave” of COVID-19 infections across the country, as the Delta variant spread through communities and mask mandates and business restrictions were relaxed over the summer. To be sure, the seven-day average for new cases in the U.S. spiked more than tenfold to 140,000 as of August 18 after settling at around just 11,000 to 12,000 new cases per day in the second half of June.

Cases in the San Diego region have also climbed significantly in recent weeks, although the story is more nuanced here. Vaccination has been a key asset to the region: According to the U.S. Centers for Disease Control (CDC), 45.4 percent of all residents in San Diego County are fully vaccinated (have received at least two doses), placing the region in the 75th percentile for all counties in the United States. Vaccination does not provide 100 percent immunity to COVID-19 or its variants, but it does reduce the severity of symptoms, including the possibility of death. In fact, looking across all counties, the death rate is reduced by 0.1 percentage point for each additional five percent of the population that gets vaccinated. Put differently, for every 500 people who get vaccinated, another San Diego life can be saved.

So, even though the regional seven-day average has increased from just two cases per 100,000 residents in June to 38 new cases per 100,000 residents as of August 18, the death rate, at 1.1 percent, remains significantly lower than the U.S. (1.7 percent), California (1.5 percent), and the surrounding counties (1.6 percent to 2.3 percent). Moreover, despite the increase in cases, San Diego’s rate of 38 per 100,000 people still lies below the nation’s 43 case per 100,000 Americans.

The CDC releases county- and state-level COVID caseload forecasts based on models that account for local vaccination rates and assumptions surrounding social distancing, among other items. Similar to California as a whole, San Diego’s relatively high vaccination rate led the CDC to forecast an essentially flat trajectory for cases through mid-September. This is in fairly stark contrast to the projections for U.S. case numbers, which are expected to climb substantially over the next several weeks as unvaccinated populations become susceptible to the profusion of the Delta variant and are exposed to the virus as Main Street businesses reopen.

While another climb in COVID cases is less than ideal, San Diego should be able to emerge from the most recent wave better off than other regions where the local populations are not as widely vaccinated. This should help to mitigate the economic fallout here as residents rebuild the confidence to engage in public life again.

Even so, it is crucial that this analysis not be misconstrued as a reason to let our guard down. If anything, this analysis shows just how critical it is for everyone to get vaccinated to better protect ourselves and our economy. Increased vaccination will help to accelerate the region’s recovery while simultaneously reducing uncertainty around the COVID virus and its variants.

Interested in more? You may also like to read:

San Diego’s Data Bites: July 2021

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

  1. 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.
  1. 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.
  1. 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 region are 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.

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San Diego’s Data Bites: June 2021

Presented by Meyers Nave, this edition of San Diego’s Data Bites covers May 2021, with data on employment, housing, 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

  1. San Diego establishments added just 2,000 net new payroll positions in May. Gains in Leisure and Hospitality were largely offset by losses in Construction and Professional and Business Services.
  1. The unemployment rate fell to 6.4 percent from April’s 6.7 percent even as several thousand people joined or rejoined the labor force.
  1. The sharp rise in home values appears to be over, but housing affordability is still well below pre-pandemic levels.

Industry view

Job gains were inconsistent across industries. Out of the 16 supersectors tracked by the California Employment Development Department (EDD), six sectors showed job growth, three sectors showed no change, and seven sectors showed job losses. Leisure and Hospitality led these sectors with 3,900 jobs added in May—3,100 of which were in the Accommodation and Food Services subsector—tacking on to the 7,000 jobs added in April. These gains were followed by increases in Government positions (1,200 jobs), Healthcare and Social Assistance (1,000 jobs), and Transportation and Warehousing (800 jobs).

Job losses in several industries countered some of the growth in May’s employment. Professional and Business services backtracked in May with a decrease of 2,500 jobs—2,100 of which were in the Administrative and Support Services subsector. Construction also reversed some of the headway made in April with a loss of 1,200 jobs in May.

While May’s employment report may have underwhelmed, year-over-year (YoY) growth continues to show just how far San Diego’s regional economy has come since the pandemic eliminated more than 200,000 jobs in the region. Employment in Clothing and Clothing Accessories Stores has increased 136.7 percent since May of last year, followed by growth of 44.3 percent in Leisure and Hospitality. See below for month-over-month and year-over-year change by industry.

San Diego’s housing market comes back to earth, but remains largely unaffordable

Despite the unprecedented disruption to the regional labor market from COVID-19, house prices climbed at an accelerated rate. The average listing price for a home in San Diego climbed 38 percent from February 2020 to February 2021. Home values have fallen off those recent highs, but the fact remains that the average price of a home in May was still some 22 percent higher than it was in February 2020.

Fortunately, it looks like affordability (measured as the ratio of total income to average monthly mortgage payment) may be improving. After 13 months of deterioration, the aggregate affordability of a home in San Diego was up 14.3 percent in May from March 2021. Several factors are at play. First, wage income has increased as job gains have continued. Second, the rise in mortgage rates of 25 to 30 basis points has pushed home prices down to help lower average monthly mortgage payments by 12.1 percent. This is because lower mortgage rates are an important factor driving price gains for real estate in San Diego County. Mortgage rates account for 70 percent of house price changes locally, almost double the national average of 35 to 40 percent. This makes sense, considering that San Diego real estate isn’t cheap, and homebuyers have likely been trying to maximize the amount of house they can buy given their budget.

The progress on affordability is encouraging, but more work needs to be done. San Diego County’s housing market has been chronically undersupplied for more than a decade, putting upward pressure on prices. This has accelerated churn in the local population, where lower-income households are being priced out to other parts of the state or elsewhere across the U.S., but new residents are showing up with high-paying jobs in hand who can continue to drive real estate values higher. If it continues, this trend may only serve to exacerbate San Diego’s affordability problem and could limit homeownership to an even smaller proportion of the population. Ensuring San Diego remains affordable and attractive to business and people is critical to its economic recovery and future competitiveness.

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San Diego’s Data Bites: May 2021

Each month, the California Employment Development Department (EDD) releases employment data for the prior month. Presented by Meyers Nave, this edition of San Diego’s Data Bites (formerly the Economic Pulse) covers April 2021 and reflects the lingering effects of the coronavirus pandemic on the region’s labor market. Check out EDC’s Research Bureau for more data and stats about San Diego’s economy.

Key Takeaways

  1. San Diego establishments added 9,800 new payroll positions in April, with most industries adding jobs over the month, but March’s employment figure was revised lower by 2,500 positions.
  1. The unemployment rate edged lower to 6.7 percent from March’s 6.8 percent. However, this was due primarily to the loss of 16,500 workers from the labor force.
  1. The flood of women workers exiting the labor force could reverse progress made on gender pay gaps and prolong the recovery.

First impression

The April employment report for the San Diego region was mixed. On the bright side, employers added 9,800 positions last month across a majority of industries, and the unemployment rate edged lower to 6.7 percent from March’s 6.8 percent. However, it was the loss of 16,500 workers from the labor force, not job gains, that lowered the unemployment rate. Moreover, March employment was revised lower by 2,500, reducing the initially reported gain of 9,900 payroll positions to 7,400.

Industry view

The battered Leisure and Hospitality sector led gains with 7,000 new positions, followed by 3,300 more jobs in Construction. Meanwhile, Healthcare and Social Assistance logged another 1,700 jobs, while Other Services—which include gyms and salons, among others—gained 1,600 positions over the month.

The loss of 3,500 Administrative and Support Services jobs weighed on growth in the Professional and Business Services cluster last month. Even so, Professional, Technical, and Scientific Services added 1,500 jobs and Management positions held steady. Elsewhere, San Diego’s Transportation sector lost 1,600 jobs.

The story for year-over-year growth has changed dramatically in the past two months. The jobs numbers for April 2021 show Total Nonfarm employment is 10.4 percent above April 2020 levels, when San Diego was in the throes of the pandemic. Payroll employment at clothing stores is up by more than 158 percent from a year prior while employment at restaurants is up an impressive 60.8 percent.

Fewer female workers could prolong (or even jeopardize) the recovery

Nationally, it has been widely reported that women have left the workforce in droves since the pandemic began. According to the U.S. Bureau of Labor Statistics (BLS), the female labor force participation rate declined from 57.9 percent in February 2020 to just 54.4 percent in April 2020, representing the weakest participation for women since 1986. By comparison, the rate for men declined from 69.0 percent to 65.9 percent during that time period.

Labor force participation for women has recovered somewhat since bottoming in April 2020 but has vacillated at roughly 56 percent for the past year, well below the pre-pandemic peak of almost 58 percent. The BLS estimates that some 2.4 million women are yet to rejoin the labor force, representing five percent of all female workers.

California EDD does not provide separate labor force statistics for men and women. However, assuming a similar U.S. trend has played out in San Diego, there still may be as many as 35,000 to 40,000 women still missing from the regional pool of workers. This is compared to just over 30,000 male workers who are yet to come back.

There are two key reasons why female labor force participation has dominated the headlines in recent months. First, it may erode some of the progress made on the gender pay gap. Second, women workers have historically helped to replace men as they dropped out of the labor force; nationally, female labor force participation rose from just 30.7 percent in 1948 to 57.9 percent in February 2020 as male labor force participation declined from 88.7 percent to 69.0 percent during that time.

Unpacking these points, employers are inclined to pay workers less who have been on hiatus for an extended period than workers who never left the workforce. This is because it is widely assumed that some skills erosion may have occurred during that time. This could mean a smaller paycheck for a larger number of women workers than men once (or if) they return to the labor market in the coming months or years.

Since a larger swath of the female population has left the workforce than men, this could put measurable downward pressure on average pay for women workers, thereby reversing some of the progress made in closing the gender pay gap in recent years. Worse, if pay is adjusted too much lower for female workers, then it may dissuade them from returning at all. And, while the same could be said for men, males tend to be far more likely to be employed in high-paying innovation industries, thereby mitigating the risk that men will choose not to return.

The addition of female workers over the past 60 to 70 years has also helped to stabilize the broader economy as more men dropped out of the labor force. Gross Domestic Product (GDP) can be conceptualized in a variety of ways. One way to estimate GDP growth is to calculate the sum of labor force growth and productivity growth. Through this lens, we can see that a contracting labor force is a significant drag on GDP growth. Given that men have consistently left the workforce since the late 1940s, future growth will hinge on women workers continuing to take their place. Otherwise, the U.S. economy—and San Diego’s—will have to rely exclusively on productivity gains to drive overall growth, an especially risky gamble since productivity growth has slowed immensely in recent decades.

Granted, the estimates provided above are based on national figures. But, even if the dynamics have played out somewhat differently here than across the rest of the country, we need to ensure steady engagement of our women workers. It is not an exaggeration to say that our regional economy depends on it.

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San Diego’s Data Bites: April 2021

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Data Bites (formerly the Economic Pulse) covers March 2021 and reflects the lingering effects of the coronavirus pandemic on the region’s labor market. Check out EDC’s Research Bureau for more data and stats about San Diego’s economy.

Key Takeaways

  1. San Diego establishments added 9,900 new payroll positions in March, but gains were uneven across industries.
  1. The unemployment rate edged lower to 6.9 percent from February’s 7.2 percent. However, this was due primarily to the loss of 10,300 workers from the labor force.
  1. Consumer spending has improved significantly as households spend stimulus checks and unwind the savings accrued over the past year or so; this could mean tens of thousands of jobs in Leisure and Hospitality and Retail in the coming two to three months.

First glance

The March jobs report for San Diego was a mixed bag. Employers added 9,900 new payroll positions, and the unemployment rate edged lower to 6.9 percent from 7.2 percent in February. However, job growth was uneven across industries, with gains in Leisure and Hospitality, Professional and Business Services, and Government partially offset by declines in Construction, Manufacturing, and Retail. Moreover, 10,300 workers left the job market in March—or roughly a third of the 29,800 people who either joined or rejoined the labor force in February. In fact, it was the loss of these workers that pushed the unemployment rate lower more than employment gains.

Industry view

Job gains were apparent in just nine of the 16 supersectors tracked by the EDD. This is somewhat surprising, given March’s blowout employment report for the U.S., which showed nearly a million new jobs were created.

Leisure and Hospitality establishments added 5,000 jobs in March, building on the 13,200 positions recovered in February. Also encouraging, more than half of these jobs came from restaurants. Meanwhile, Professional and Business Services logged an additional 3,300 positions thanks to a big push from the crucial Professional, Scientific, and Technical Services segment, which notched 2,900 more jobs in March than the month prior.

Builders let go of 1,500 workers in March, reversing most of the 2,100-worker gain from February. And, while losses in Construction aren’t completely unheard of in March, they’re certainly the exception rather than the rule. Builders have let go of workers in March in only seven of the past 31 years.

Manufacturing, Retail, Finance, and Real Estate companies let go of a combined 1,100 workers in March. These figures may reflect some statistical noise and potentially even some buyback after February’s strong report. Nonetheless, the loss of 400 Retail positions is a surprise, especially following the March U.S. retail sales report, which showed a huge rebound in consumer spending last month.

Relief for Hospitality and Retail is (finally) on the way

U.S. retail sales, which include sales at restaurants and bars, jumped by 9.8 percent in March, blowing past analysts’ expectations. The meteoric rise was in large part the result of stimulus payments that were distributed to millions of households last month as part of the Biden administration’s $1.9 trillion COVID-19 rescue package.

In addition to stimulus-related spending, consumers may have also begun unwinding some of their savings now that a sustained recovery appears to be in the offing. To be sure, households began hoarding cash at the onset of the downturn last year. The U.S. personal saving rate peaked at 33.7 percent last April, decimating the previous record of 17.3 percent that was set in May 1975, and remained perched at an elevated 13.6 percent in February 2021, which is nearly double the pre-pandemic average of 7.3 percent observed between 2010 and the end of 2019.

As long as the news around COVID cases continues to be positive and residents continue to be vaccinated at current rates, it’s not unreasonable to suspect that consumers will continue to spend freely into the summer and fall months.

This is particularly good news for San Diego’s restaurant and bar scene. Given the region’s status as a premier tourist destination, changes in national spending at eating and drinking establishments correlate strongly with job growth here at home. If sustained, March’s leap in U.S. retail sales could mean as many as 50,000 to 60,000 payroll positions at San Diego’s bars and restaurants, in addition to March’s jobs build as employers continue to meet rising demand.

Retailers can also expect a big boost. If historical relationships hold, 15,000 to 20,000 positions could appear in April and May if consumers continue to loosen their purse strings. The correlation between local Retail employment and national consumer spending is quite a bit looser than the relationship for eating and drinking places. However, as a point of comparison, local consumer spending data from Affinity also reveal a rebound, which reinforces the notion that job gains will continue for at least the next several months barring any unexpected hiccups.

Bottom line

Even though it wasn’t quite as strong as expected, March’s employment report is further evidence that the job market has finally turned the corner after a temporary slump in December and January. Nonetheless, it will still take some time before the damage wrought by the COVID downturn is undone. Payroll employment is still 7.2 percent below year-ago levels and 8.1 percent lower than the pre-pandemic level reached in February 2020. Moreover, the unemployment rate remains elevated, and 57,140 workers are still missing from the labor force.

All of this is to say, we should be cautiously optimistic. On balance, odds favor a strong rebound this year and into 2022, but there is still a lot of work to be done. Now, more than ever, it is necessary that we get this recovery right.

Training and upskilling will be vital for the thousands of workers whose jobs may never return. EDC’s Advancing San Diego program is facilitating this by connecting employers, educators, and students to the training and education they will need to thrive in the coming expansion. Just this week, Advancing San Diego announced its Preferred Providers of Manufacturing talent, and opened applications for small businesses seeking interns.

It will also be imperative that San Diego small businesses are connected to large buyers in order to keep remaining businesses in the region healthy and to help spur a new wave of entrepreneurship to meet the needs of San Diego’s largest institutions and employers. EDC’s Anchor Collaborative is working with large local businesses to help ensure big companies “shop local” for their procurement needs. Our research estimates that a one percent shift in procurement spending by large companies to local businesses could create thousands of new jobs in the region.

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San Diego’s Data Bites: March 2021 Pt. 2

SAME INTEL, NEW GREAT ‘TASTE’

In case you missed it, EDC has launched a fresh take on our long-standing Economic Pulse. Welcome to the second edition of San Diego’s Data Bites!

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Data Bites covers February 2021 and reflects the lingering effects of the coronavirus pandemic on the region’s labor market. Check out EDC’s Research Bureau for more data and stats about San Diego’s economy.

Key Takeaways

  1. San Diego employers added back 31,900 jobs in February, undoing the lion’s share of January’s loss of 37,900 payroll positions.
  1. The unemployment rate dropped to 7.2 percent from January’s 8.0 percent even as nearly 33,000 people joined or rejoined the labor force.
  1. February’s employment report is reason for cautious optimism that the economy has turned the corner, but there is still work to be done. Employment remains 8.7 percent below year-ago levels, the labor force is still 2.1 percent smaller than a year ago, and the outlook is wrought with uncertainty.

First glance

San Diego’s labor market bounced back in February, following two consecutive months of declines. San Diego employers added back 31,900 jobs, undoing the lion’s share of January’s loss of 37,900 payroll positions (revised from -38,600) and lowering the unemployment rate to 7.2 percent from January’s 8.0 percent (revised from 8.1 percent). Even better, the unemployment rate dropped as 32,900 people joined or rejoined the labor force—more on that below.

Industry view

Job gains were widespread across industries. Every sector except Wholesale Trade, Retail, and Healthcare and Social Assistance added jobs, and losses in those sectors were de minimis.

The volatile Leisure and Hospitality industry added 12,800 new jobs, following a loss of 11,500 in January. Business and Professional Services firms also added 6,800 jobs, while Construction and Other Services—which includes dry cleaners, laundromats, and other personal services—each gained 4,100 positions.

Gains in Business and Professional Services were led by Administrative and Support Services, which added 4,900 new positions. This subsegment also includes temporary staff, and growth in this field can sometimes be a positive bellwether for future gains as those temporary staff members are hired on permanently.

Nonetheless, it’s important to keep last month’s positive report in perspective. Employment in every industry, except Construction and Utilities, remains below year-ago levels. For example, despite last month’s push, Leisure and Hospitality employment still rests some 33.4 percent below its February 2020 level, and Other Services employment is still 22.9 percent lower than it was a year ago.

San Diego workers flock back to the workforce

Perhaps the most encouraging piece from February’s employment report is the surge in the labor force. Labor force participation among women and minorities has plummeted across the country since the pandemic ensued; and while EDD doesn’t report labor force statistics across demographic groups like the U.S. Bureau of Labor Statistics (BLS) does, it can be safely assumed that a similar dynamic has played out locally. As such, the return of these workers is a welcome sign, if sustained, because it will help to mitigate the cumulative effects of income losses among those most vulnerable groups.

Again, however, it is important to keep this all in perspective; San Diego’s labor force is still 2.1 percent smaller than it was in February 2020, and this has masked the true extent of the remaining weakness in the job market. This is because people who leave the labor force are no longer counted as unemployed by EDD and the BLS. If there were as many people in the labor force in February 2021 as there were a year earlier, the unemployment rate would still be perched at 9.4 percent, more than two percentage points higher than the officially reported 7.2 percent last month.

Wrapping it up

In sum, the February employment report suggests the regional economy may be turning the corner after a couple of disappointing employment reports in December and January. To be sure, COVID-19 cases have declined steadily in San Diego County in recent weeks, and the strong drive to get vaccine shots into people’s arms is most likely reassuring companies that the end of the pandemic is finally within striking distance. If so, then we can expect job gains to continue in coming months.

Nonetheless, the outlook is wrought with uncertainty. It remains unclear whether current vaccines will be effective in protecting against new variants of COVID-19. If not, then a future spike in coronavirus cases could force additional closures and restrictions, thereby hamstringing the recovery. In addition, the pandemic has led to wholesale shifts in how companies do business. Consequently, not every company will need to replace all of the workers that were let go, and thousands of the jobs lost over the past year may never return. Moreover, many businesses forced to shut down over the past year may not reopen, meaning that the weight of the jobs recovery will rest on fewer companies, which could push the timeline for a full recovery further into the future.

All of this is to say, we should be cautiously optimistic. On balance, the prognosis is good that San Diego will enjoy a relatively strong recovery this year and into 2022, but there is still much work to be done. Now, more than ever, it is necessary that we get this recovery right.

Training and upskilling will be vital for the thousands of workers whose jobs may never return. EDC’s Advancing San Diego program is working to do just that.

It will also be imperative that San Diego small businesses are connected to large buyers in order to keep remaining businesses in the region healthy and to help spur a new wave of entrepreneurship to meet the needs of San Diego’s largest institutions and employers. EDC’s Anchor Collaborative is working with large local businesses to help ensure big companies “shop local” for their procurement needs. Our research estimates that a one percent shift in procurement spending by large companies to local businesses could create thousands of new jobs in the region.

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San Diego’s Data Bites: March 2021

Same intel, new great ‘taste’

EDC is excited to unveil a fresh take on our long-standing Economic Pulse. Welcome to San Diego’s Data Bites!

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Economic Pulse—now ‘Data Bites’—covers January 2021 and reflects the effects of the coronavirus pandemic on the labor market as well as benchmark revisions to 2020 employment data. Check out EDC’s Research Bureau for more data and stats about San Diego’s economy.

Key Takeaways

  1. San Diego employers eliminated 38,600 payroll jobs at the start of the year. Job losses in January are typical as temporary holiday staff is let go, but December’s report showed no surge in holiday hiring in 2020.
  1. Job losses nudged the unemployment rate higher to 8.1 percent from December’s 8.0 percent even as nearly 18,000 workers fled the labor force.
  1. Annual benchmark revisions to 2020 employment data revealed that the economy suffered steeper job losses last Spring and ended 2020 with roughly 30,000 fewer jobs than were initially reported.

San Diego’s labor market kicked off 2021 on a sour note. Local employers eliminated 38,600 payroll jobs in January, nudging the unemployment rate higher to 8.1 percent from 8.0 percent in December even as nearly 18,000 workers fled the labor force.

Job losses are typical in January as businesses roll off temporary holiday help. However, what makes this report unique is that January’s job losses followed a decline of 6,200 positions in December (revised from an initially reported -5,300 jobs), which is extremely atypical for the holiday season. In fact, December’s decline marks only the sixth time in 72 years where employers have let more workers go than they hired.

January’s dismal jobs report likely reflects the struggles of local businesses amid the ongoing COVID-19 pandemic rather than seasonal factors. Burning Glass estimates that San Diego consumer spending is still trending about 10 percent lower than it was before the pandemic, and data from Womply show that roughly 30 percent to 40 percent—or between 30,000 and 40,000—local businesses have been forced to close over the past year.

Industry view

Employment declines were widespread across industries. With the exception of Manufacturing and Utilities—which added a meager 100 jobs apiece—every industry either lost jobs or stayed flat. Hardest hit was Leisure and Hospitality, which gave up 12,200 positions and continues to be the most negatively impacted by the pandemic. Retail, which shed 6,300 jobs, was a distant second, erasing nearly all of the gains made since Spring 2020. The decline in Retail, although disheartening, was somewhat expected, however, since national retail sales and local consumer spending have both remained weak in recent months.

The nearly ubiquitous loss of employment across industries is another indication that labor market weakness in January stems from COVID-related measures rather than seasonality. In a typical year, January job losses would be focused around Leisure, Hospitality, and Retail as holiday staff is let go. However, in more normal times, most other industries have remained stable instead of laying off workers like they did this year.

2020 was even worse than we thought

Also included in January’s jobs report were benchmark revisions to the 2020 employment figures. Typically, in periods of contraction, employment revisions are negative, and that is exactly what EDD reported.

Benchmark revisions revealed that San Diego hemorrhaged 248,000 jobs between February and April 2020, which is 25,000 more job losses than initially reported. Leisure, Hospitality, and Retail accounted for around 16,000 of those additional losses. By the end of the year, revisions showed 30,100 fewer nonfarm payroll jobs in the region compared to the initial estimates.

The additional loss of jobs also meant that the unemployment rate was revised higher. Initial estimates showed the rate peaking at 15.2 percent in April 2020; revised data revealed that joblessness peaked at a significantly higher 15.9 percent, which is more in line with EDC’s estimates at the time.

You can use the below graphic to explore how revisions impacted total employment in the region, as well as each of the industries tracked by EDD on a monthly basis.

The road ahead

San Diego’s job market is entering 2021 on a weaker footing than initially thought. More jobs need to be recouped, and there are fewer businesses to help carry that weight. Together, this implies that the recovery will take longer than anticipated even after San Diegans have been vaccinated against the novel Coronavirus.

Still, there are actions we can take to help speed things along and emerge even stronger than before. Now, more than ever, it is necessary that we get this recovery right.

Training and upskilling will be vital for the thousands of workers whose jobs may never return. EDC’s Advancing San Diego program is working to do just that.

It will also be imperative that San Diego small businesses are connected to large buyers in order to keep remaining businesses in the region healthy and to help spur a new wave of entrepreneurship to meet the needs of San Diego’s largest institutions and employers. EDC’s Anchor Collaborative is working with large local businesses to help ensure big companies “shop local” for their procurement needs. Our research estimates that a one percent shift in procurement spending by large companies to local businesses could create thousands of new jobs in the region.

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San Diego’s Economic Pulse: January 2021

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Economic Pulse covers December 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.

Key Takeaways

  1. San Diego lost 5,300 jobs, on net, in December, which is not typical during the holiday season.
  1. The unemployment rate jumped to 8.0 percent from 6.6 percent in November amid job losses and growth in the labor force.
  1. San Diego’s “K-shaped” recovery will exacerbate longstanding structural problems in the economy, making the case for an inclusive growth strategy even stronger.

Labor Market Overview

San Diego’s labor market suffered a setback in December after new business restrictions were put into place to combat a surge in COVID-19 infections and an alarming decline in ICU bed capacity. Local employers let go of 5,300 workers, on net, last month, lifting the unemployment rate to 8.0 percent from 6.6 percent in November. A drop in employment for the month of December is atypical, since holiday hiring is usually in full swing. Last month’s decline marks only the sixth time in 72 years where employers have let more workers go than they hired in December.

San Diego’s unemployment rate is lower than California’s 8.8 percent but significantly higher than the nation’s rate of 6.5 percent in December.

The causes for the rise in San Diego’s December unemployment rate are two-fold, and the news isn’t entirely bad: First, and most obviously, job losses drove the rate higher. However, this was compounded by an increase in the labor force of 12,200 people. The labor force vacillated for most of 2020 but ended the year close to its February, pre-pandemic level—good news for the labor market heading into 2021, if it is sustained.

Industry View

Leisure and Hospitality employers let go of 9,600 workers in December, which was more than enough to lower total employment. The lion’s share of hospitality job losses came from Accommodation and Food Services, which gave back 10,300 positions. Other Services, Government, Manufacturing, Educational Services (private, non-government), and Financial Activities each lost jobs. However, the losses for all of those industries totaled just 4,300, less than half of the layoffs experienced in Accommodation and Food Services alone.

The weakness in Leisure and Hospitality drove an even larger wedge between the jobs recovery for high-paying and low-paying positions, exacerbating a worrisome trend where the income and wealth gaps in San Diego will likely widen exponentially as a result of the pandemic-fueled recession.

Despite the decline in topline employment, job gains were apparent in a number of industries. Business and Professional Services added a healthy 2,500 workers in December, fueled by a gain of 2,700 in the crucial Professional, Scientific, and Technical segment, while retailers brought on 1,900 additional employees despite weak retail sales.

Behind the Numbers

All in all, December’s lackluster employment report is a downer, but not an unexpected one. With COVID-19 cases surging in the region and hospitals running out of valuable space for patients, business restrictions became necessary from a public health perspective.

As mentioned, the decline in employment last month is not typical for December, but it may bode well for January’s employment report. Under more normal circumstances, January typically reveals job losses as seasonal workers are let go. However, given that seasonal hiring was more tepid in 2020, layoffs in January may be less pronounced.

Labor force growth in December is also encouraging if it can be sustained. The extension of federal emergency unemployment benefits should help to keep a floor under the workforce, since only people in the labor force can claim them. Additionally, despite the sharp drop in Leisure and Hospitality employment last month, many firms in the region are still hiring. Therefore, we can expect people to remain in the labor force as long as job growth resumes as we enter 2021.

Unfortunately, these are about the only silver linings in December’s jobs report.

Annual revisions to the 2020 jobs numbers will be released by California EDD on Friday, March 12. Typically, revisions show greater job losses than were initially reported during recession periods. This is because the Labor Department estimates the pace of business formations in a given month, which usually assumes the addition of at least some new jobs as new firms come online. However, a Census-like count of business formation carried out after the initial estimates are released usually shows more business closures, on net, which thereby reduces the level of employment. So, in all likelihood, 2020 revisions could reveal deeper job losses last year than initially reported.

The shape and timbre of the jobs recovery means that even more work will be needed to shore up the local economy. The exponential widening in wealth and income gaps from the “K-shaped” recovery to-date will mean even more aggressive policies aimed at protecting and empowering our lowest-paid workers. Also, declines in the labor force earlier in 2020 were in large part the result of women leaving the workforce. If 2021 exhibits a repeat of that contraction, then it will almost certainly lead to greater disparities in gender pay. Finally, housing has continued to become even less affordable amid high unemployment and rising home values across the region.

It will take intentional and effective action to get this recovery right. It is now more important than ever to ensure greater access to higher education and worker training for our region’s lower-income households. Additionally, companies may also want to consider employee-ownership models, like the one Taylor Guitars recently announced, to give workers a larger stake in their economic fortunes. By offering a pathway to higher paying, more stable employment, we can ensure a more resilient and vibrant San Diego in the future, which will benefit all of us for decades to come.

Learn more about San Diego’s right recovery

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San Diego’s Economic Pulse: December 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 November 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.

Key Takeaways

  1. Unemployment falls to 6.6 percent.
  1. San Diego retailers gear up for holiday season by hiring 1,800 employees, but sales continue to suffer.
  1. Shop local this holiday season and wear a mask.

Labor Market Overview

The region’s unemployment rate was 6.6 percent in November, down from a revised 7.5 percent in October 2020, and still more than twice the year-ago estimate of 2.9 percent. Unemployment continues to increase in San Diego’s unincorporated and poorer areas, while falling in wealthier areas. The highest unemployment area in the region was Bostonia at 12.4 percent followed by National City at 10.3 percent, and the lowest was Solana Beach at 3.6 percent.

The region’s unemployment rate remains lower than California’s unemployment rate of 7.9 percent, but slightly higher than the national rate of 6.4 percent. While unemployment continues to fall, much of the improvement can be attributed to government support. In fact, unemployment claims increased again this week showing as emergency aid has dried up—proof the local job market could once again backtrack in the coming months.

Total nonfarm employment increased by 14,300 in November. Trade, transportation, and utilities accounted for the largest monthly gains, adding 8,200 jobs last month, primarily concentrated in retail trade (up 1,800 jobs). Even so, compared to a year ago, retail trade is still down 6,200 jobs. Professional and business services followed with an increase of 2,800 jobs. Job gains were driven by administrative and support services, which added 1,800 jobs. Food services and drinking places continue to struggle, shedding 1,000 jobs last month, even before the mandatory closures that took place in December.

Compared to a year ago, San Diego nonfarm employment remains down 97,700 jobs, or 6.4 percent. Leisure and hospitality represent the largest share, down 35,300 jobs. Accommodation is down 12,900 jobs over the year, and food services and drinking places are down 22,400.

Retail Sales Decline

November marked the beginning of the holiday shopping season as shown by an increase in retail employment in San Diego. However, nationwide retail sales numbers were gloomy. Retail sales were down 1.1 percent from October (seasonally adjusted), which was much worse than expected and likely impacted by increased COVID-19 infections and decreasing household income as expanded unemployment benefits expired. Without a stimulus relief package from Congress, retail sales declines will likely continue and perhaps become severe as millions lose unemployment benefits the day after Christmas.

Department store sales in the U.S. declined by 19 percent since this time last year and 7.7 percent since last month. Clothing and clothing accessories stores declined by 16.1 percent since last year and 6.8 percent since last month. Food service and drinking place stores declined by nearly one percent since last year and 4 percent since last month due to mandatory stay at home closures.

November’s retail sales were the worst since April, adding to the already growing list of signs that a slowdown in the recovery could be imminent. As San Diego’s retailers hire more employees for the holiday season, the call to shop local and safely becomes more necessary, especially given what appears to be a slowdown in consumer spending. Small businesses drive San Diego’s economy and create thriving neighborhoods. Check out some local favorites around the County.

 

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

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