Economy in crisis: Fresh thinking on career advancement is needed

THE TAKEAWAYS

  • Fresh thinking on career advancement is needed in order to create a more resilient San Diego economy.
  • San Diego’s lowest-paid workers were the first to be let go during the COVID downturn and will likely be the last to be called back to work.
  • Upskilling and reskilling employees in lower-paying sectors like retail and leisure and hospitality will improve living standards and help businesses in other industries find qualified talent without draining the pool of workers for retailers, restaurants, and bars.
  • Colleges and universities will need to rethink curricular requirements in order to adapt to the changing needs of the business community.

San Diego’s economy has emerged from the depths of the COVID downturn, but the road to a full recovery is looking longer (and bumpier) than many expected. A second wave of business shutdowns and restrictions amid a rise in positive cases last month portends a significant weakening in the outlook heading into late summer and fall.

The unexpected and historically severe drag on San Diego’s job market since March underscores the need to build a more resilient workforce that can better weather future downturns. More than half of the 223,700 jobs shed between February and April were in leisure and hospitality and retail alone. These jobs could be slow to come back, since shops, restaurants, bars, and venues won’t be able to operate at full capacity until an effective and safe vaccine has been widely produced and distributed—something that’s not expected until at least early next year.

THE MOST VULNERABLE HAVE BECOME THE MOST VULNERABLE…AGAIN

Other sectors have undoubtedly been rocked by the economic shockwave of the COVID pandemic, but retail and leisure and hospitality workers were especially susceptible, particularly those in accommodation and food services. Not only were they the first to be let go, but many will likely the last to be rehired. What’s worse, San Diego’s accommodation and food service employees made just over $30,000, on average, last year compared to about $74,000 for all workers.

The outsize damage to leisure and retail is not isolated to just the past few months. Both industries have historically been more volatile over the past few decades. During the Great Recession of 2007-2009, total nonfarm employment in San Diego fell 8.9%. However, retail employment tumbled 16.2% and leisure and hospitality gave up 14.1%. It stands to reason that a similar dynamic could play out when the next downturn inevitably arrives.

TAPPING INTO NEW TALENT

Tourism, which includes retailers, accommodation, and eating and drinking establishments, is a large and important piece of the economic pie (pun intended) here in San Diego. Luckily, tourism-related industries have a huge supply of readily available workers. Upskilling and reskilling of many of the employees looking to get out of hospitality could expand the base of workers in relatively higher-paying, less volatile occupations without draining the pool of qualified workers for local restaurants, bars, and hotels. This could be extended to retail and other lower-paying sectors and would simultaneously improve living standards while alleviating stress on local employers who can’t find qualified talent in non-tourism fields. It would likely keep a greater number of people employed during future downturns, too.

Looking at job postings data for the region, local employers have had a tough time filling roles in a wide variety of occupations. Software developer and engineering roles are ubiquitous on lists like these, but it extends well beyond the buzzy positions du jour and includes others like marketing managers, sales reps, and truck drivers. The average annual pay for these and other in-demand positions is over $63,000 per year versus $36,720 for jobs where more than enough applicants can apply.

SO, WHAT’S THE CATCH?

As usual, the devil’s in the details. Even after things begin to normalize, walking out on one’s barista job to immediately pursue a post-secondary degree in electrical engineering typically isn’t an option. Consequently, career advancement would have to occur more gradually and require some serious curricular agility from local colleges and universities.

EDC’s Advancing San Diego initiative is exploring a viable path forward. The initiative serves to boost lower-paid employees into more stable, higher paying jobs with greater potential for upward mobility, called “lifeboat jobs.” An example would be someone like a forklift operator at a local factory who could ultimately climb the rungs into Operations Management.

With better connectivity to academia, business leaders can begin to communicate the specific skills required to successfully perform lifeboat jobs in any number of high-demand positions. Then, local colleges and universities could build out “micro-credential” certificates or academic programs designed to prepare workers in a matter of weeks—rather than years—to take on those jobs.

Given the deeply-seeded roots of tradition in academia, this would likely emerge most immediately as a strategy in the universe of Continuing or Extended Studies. However, the swiftly evolving landscape of business in the 21st century seems to suggest that a more targeted and flexible approach to general coursework would provide the best value for students (and parents) and would also be of great service to businesses looking for a reliable pipeline of skilled workers upon graduation.

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

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Economy in crisis: July jobs report likely to be overhyped

THE TAKEAWAYS

  • The July jobs report is likely to look better than it should because of the timing of data collection by the Labor Department.
  • San Diego’s tourism sector continued to recover through mid-July, before renewed shutdown orders were given, but U.S. air travel remains well below year-ago levels.
  • Any setback from last week’s partial shutdown is unlikely to show up until the August jobs numbers are released.

First, it’s important to note that the May employment report was revised 7,300 lower, making for a net 46,700 positions added in June to May’s pre-revised figure—almost exactly matching our prediction for 45,000 net new positions.

June’s employment report also aligned with expectations; San Diego employers added 54,000 jobs last month. The additional jobs lowered the local unemployment rate from 15.2 percent (revised higher from an initial estimate of 15.0 percent) to 13.9 percent. However, this is still nearly 3 percentage points higher than the national rate of 11.2 percent in June, due in large part to the higher concentration of food services, retail, and tourism in San Diego, which were ravaged by the COVID-19 downturn.

Even though June’s numbers were just released, it’s never too early to look ahead to the July report. With San Diego partially shutting down again last week, conventional wisdom suggests that the July report will show a fresh spate of job losses. However, timing is key. The July employment figures will be estimated using data collected the week of July 12, 2020. Therefore, any layoffs from last week’s move to shut down bars, indoor dining areas, museums, zoos, and hair salons will probably not be picked up in July’s report. In other words, the July employment report will most likely look better on the surface than it would had the data spanned through the end of the month—wrongfully implying that the regional economy fared better than it actually did in July.

TOURISM FORGES AHEAD…

Local tourism has a long road ahead of it before it fully recovers, but hotel occupancy data produced by the San Diego Tourism Authority through July 11, 2020 show that both the demand for and supply of hotel rooms has continued to rise since bottoming in April. Average daily rates for rooms in the region have also continued to increase. We can anticipate changes to accommodation employment given its tight relationship to the room supply and daily rental rates, since hotels need to be sufficiently staffed to manage tourist traffic in any given week.

Before the COVID-19 outbreak, San Diego hotels employed 31,400 workers. That number was slashed by more than 60 percent after statewide shutdown orders in March. The industry added back 5,900—or roughly one in three—of the jobs lost to COVID-19 shutdowns in June. And the tight relationship between hotel occupancy, room rates, and employment suggests that accommodation services could be shown in July to have recouped another 2,500 to 3,000 jobs, bringing total industry employment back above 20,000 for the first time since March.

…BUT…

TSA data shows a painfully slow recovery in air travel, with throughput at U.S. airports over the past week down an average of 74 percent from a year ago. Given San Diego’s stature as an international tourism destination, the lack of jet-setter traffic through airports means that San Diego hotels will face an uphill battle to fill open rooms. This underscores the tenuous nature of local tourism’s comeback.

 

LOOKING AHEAD

National employment numbers will shed some more light on what we can expect to see locally in the July jobs report. However, any positive takeaways from that report should be taken with a grain of salt, since the most recent round of local shutdowns will undoubtedly mean that companies have to once again let go of employees. The magnitude of job losses will hinge on the duration of the current shutdown, which is contingent on a number of metrics, including the rate of positive COVID-19 tests across the county, number of community outbreaks in a given week, and local hospital and ICU capacity, just to name a few.

Taken together, July’s employment report is more than likely to present another round of job gains, but August’s report is almost certain to reveal a setback in the recovery—although, how big of a setback won’t be clear for at least another several weeks. Moving forward, job training and retraining services will be increasingly vital to the long-term health of the economy, since temporary layoffs are more likely to become permanent ones in the coming months if businesses remain limited to partial operating capacity.

This is not to say that we advocate reopening at the risk of public healthinstead, we are advocating for a path to opportunity for San Diego’s most vulnerable workers to reduce their reliance on inherently volatile industries and occupations.

 

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

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San Diego’s Economic Pulse: July 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 June 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 Slightly Lower

The region’s unemployment rate was 13.9 percent in June down from a revised 15.2 percent in May 2020, and far above the year-ago estimate of 3.3 percent. The region’s unemployment rate remains lower than the state unemployment rate of 15.1 percent, but higher than the national unemployment rate of 11.2 percent during the same time period, respectively. Read more about EDC’s unemployment analysis.

Employment Continues to Recover

Between May 2020 and June 2020, total nonfarm employment in San Diego increased from a revised 1,301,700 to 1,355,700, a gain of 54,000 jobs. EDC’s COVID-19 survey of businesses shows that more than 60 percent of firms surveyed reduced their staff between March and May due to COVID19.The June employment numbers reflect jobs gradually returning to the region. This is consistent with state and national data. In California, nonfarm employment increased by 558,200 in June from the month prior, while payroll employment increased by 4.8 million in the U.S. during the same time period.

Compared to a year ago, San Diego nonfarm employment remains down 153,600 jobs or 10.2 percent. In California, total nonfarm employment is down 1.7 million jobs, or 10 percent compared to a year ago, while the U.S. is down nearly 13 million jobs, or 8.5 percent.

Sector Employment Slowly Returns

The leisure and hospitality industry accounted for the largest monthly gains, adding 34,700 jobs in June, primarily concentrated in food services and drinking places as restaurants reopened. While it is encouraging that the food services and drinking places sector has increased employment the last month, the industry still has 20 percent fewer jobs compared to a year ago. Tourism is still not close to recovered and likely will take much longer, the accommodation industry has 44 percent fewer jobs compared to a year ago.

Trade, transportation, and utilities employment increased this month, adding 9,500 jobs. This was driven primarily by retail, which added 6,800 jobs. Clothing and clothing accessories stores grew by nearly 49 percent in June. This aligns with national retail sales, which jumped 7.5 percent in June. The Census Bureau reported retail sales are 1.1 percent higher than their levels from a year ago, but those gains could be short-lived as infections begin to rise and closures continue.

Construction followed with an additional 4,100 positions, and educational and health services recovered 2,800 jobs lost between April and May. The bulk of job gains in educational and health services came from Ambulatory Health Care Services. The largest monthly employment decline was in government, with a loss of 3,900 jobs, as public finances continue to face revenue challenges.

Looking Ahead

While the employment report reveals solid monthly job gains, San Diego’s economy will likely face more job losses in the coming months. Just last week, the Governor announced more closures to retails and dining in. As industries close again, temporary layoffs are more likely to become permanent and the unemployment rate may rise again. Looking ahead, it is critical that workers have ample access to job training in order accelerate the economy’s recovery.

As educators plan for the upcoming school year, they are faced with unprecedented circumstances. San Diego Unified announced an online only fall learning plan, a first in the region. The lack of on-campus education will not only impact students and children with special needs, but also the working parents that depend on schools and daycare while at work. There are 180,000 households with two working adults and school-aged children. That means there are at least 360,000 workers in our region whose productivity or presence at work is being impacted while the virus remains a threat.

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

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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