At the top of each year, we try to look ahead to which trends are most worth tracking for the potential impact each can have on our local economy. We began 2025 watching AI and affordability, as well as whether massive investments from both corporations and the federal government would translate into job growth.
We also began 2025 flagging that there would be many wild cards in the year ahead that could knock us off course. As we enter the second half of the year, we want to pause to take stock of what has been a very tumultuous six months, with both immediate impacts and long-term implications.
Affordability and AI
The housing affordability picture looks mostly the same as it did in January: dire. Mortgage rates have bounced around a narrow range while staying above six percent, and the median home price remains just above $1 million, translating to a monthly mortgage payment of about $5,300. This means the annual household income needed to qualify for a conventional loan is more than $260,000, which roughly 12 percent of all households in the region can afford.
AI adoption remains one of the most profound questions in workforce development. San Diego has once again been identified as a ‘star hub’ for AI capacity and adoption, predominantly as a region with high rates of firm readiness and job exposure to generative AI. Tech giants continue to race for AI dominance, which has led to eye-watering compensation packages, record valuations for chipmakers, and $70 billion announced in new federal investments for data centers and power grid upgrades.
What the cut?
Speaking of federal funding, the impact of federal investments on local job growth is more immediate. That’s because all the money that the federal government lined up to invest in re-shoring manufacturing, capacity building for semiconductors, and sustainable energy projects in the last few years has been cut off, significantly scaled back, or temporarily tied up. Oh, and don’t forget state and local public funding cuts.
It is worth noting that much of this remains to be settled as the courts figure out what the Trump administration can legally defund. Yet, much of it is already impacting San Diego’s economy.
New jobs data shows that through the first half of 2025, the region lost 4,900 jobs. This is not as bad as the first six months of 2024 but still trending in the wrong direction. June’s unemployment rate jumped to 4.9 percent (from 4.0 percent in May) as the number of people unemployed rose 14,200—the largest month-over-month increase since the pandemic lockdowns of April 2020.
Private sector job losses are even deeper, down 8,400 year-to-date. Every major sector in San Diego has shed jobs through mid-2025, with the exceptions of Healthcare and Social Services, Leisure and Hospitality, and State and Local Government.
Way too many wild cards in this deck
The pace of new policy directives from D.C. has been overwhelming. The lack of clarity as to whether these policy proposals will be implemented, or are legally enforceable, has been paralyzing. Whether it’s consumers, homebuilders, or manufacturers, the sentiment remains weak.
In San Diego, it’s not just bad vibes. The impacts are real.
The newly-created Department of Government Efficiency (DOGE)’s contract cancellations have started chipping away at our federal workforce, including DoD which spent $20 billion here last year. Proposals to reduce indirect costs associated with federal research grants have led to hiring freezes and layoffs in higher education and could evaporate nearly $448 million from the regional economy. The proposed cuts to NIH and NSF funding would nearly cut in half the region’s $1.1 billion that fuels the research that has led to 99 percent of drugs approved a decade ago. Congress’ latest tax law is set to increase the population of uninsured patients by 1.7 million across California and is already manifesting in workforce reductions at local hospitals, which hasn’t yet showed up in the data.
The up and down tariff threats are the top concern of local businesses that sell in global markets. As one company executive put it, retaliation from countries like China has “completely changed the growth strategy.” These impacts are felt locally in jobs losses to industries like Transportation and Warehousing (down 10 percent, year-to-date) and Retail (down almost five percent). These impacts are also felt by $1 billion less in venture capital, $500 million less in export sales, and 770 fewer employers looking to hire than a year ago in San Diego.
“If you want to go far, go together.”
There are many famous quotes about navigating uncertainty and how resilience drives success. At EDC, we often quote an African proverb: “If you want to go fast, go alone. If you want to go far, go together.”
Collaboration has often defined success in this region; it’s what makes us different.
Whether the winds change and we need to adjust our sails, or whether we fall seven times but pick ourselves up eight, let’s do it together.
As I look into my crystal ball again, I see the next six months will continue to be riddled with uncertainty and unexpected challenges. I also still see a region that is a top three Life Sciences market, a top three market for startups, has the largest concentration of military assets in the world, and the busiest land port in the Western hemisphere. So, we have a lot to build on. As your business works to navigate changing rules, reach new markets, or find talent, don’t go it alone. EDC is here to help.
Onward and upward,
Eduardo Velasquez
Sr. Director, Research & Economic Development
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