If not openly, it’s something people have been talking about behind closed doors: is the Bay Area’s economy on the verge of a downturn?
Economists have been warning that the Bay Area has reached “full employment,” a signal that the good times may be nearing an end. Just last month, Beacon Economics cautioned that the Bay Area’s economy could be disrupted by a lack of skilled labor and record high home prices.
While these fears are certainly real, it’s not all gloom and doom just yet.
After shedding 2,000 jobs in May, a new report finds the Bay Area posted strong job gains in June. Collectively, the 9-county Bay Area added 11,100 jobs last month, according to the state’s Employment Development Department. Santa Clara, East Bay, and San Francisco-San Mateo lead the way.
Santa Clara added 2,600 jobs, 800 of which were health care positions. East Bay gained 1,900 jobs, the bulk of which were in administrative services such as clerical and building support jobs. San Francisco-San Mateo added another 4,900 jobs, with the hotel and restaurant industries posting the largest gains. Solano County was the only to post job losses last month.
In total, Bay Area employers have added just over 15,000 jobs this year. The excitement over this job growth is tempered by the reality that this is just a fraction of the 54,400 jobs the Bay Area added during the same period last year.
“The Bay Area is growing significantly more slowly now than it was last year, which was slower than the prior years,” says Christopher Thornberg, an economist and partner at Beacon Economics. “It’s not that companies don’t want workers; they want to hire,” says Thornberg. “The complaints that I’m hearing about is that companies just can’t find workers.”
Job seekers, meanwhile, say employers are being too picky.
Recent college graduate and Fremont resident Mark Phan has a degree in computer sciences but is still struggling to find a job. “I’m surprised that it’s been this difficult to find something,” he says. Even though he has more than a decade of experience, San Jose resident Robert Wood got so fed up working on a contract basis that he decided to up and leave the tech industry altogether. Now, he’s an apprentice plumber.
Some lower-wage workers are being pushed out of the area altogether. “[They] simply cannot afford to live here, adding more strain to an already tight labor market,” the Beacon report states.
So, is it time to panic? Not quite.
Yes, the labor market has softened, “but the usual things that cause a recession are sustained shocks to the economy, and they are not in the picture right now,” says Robert Kleinhenz, Beacon’s director of research. “Sudden increases in the price of oil, spikes in interest rates aren’t happening. Inflation is low, oil prices are low. Yes the Federal Reserve is raising interest rates, but as Janet Yellen has said, the pace of increases is so slow that it’s like watching paint dry. There is nothing that presages some sort of recession.”
There’s also reason to believe the local economy will pick up steam moving forward. Several companies—Google being the most notable—have recently announced plans to expand in the Bay Area. Google’s planned “mega campus” would add upwards of 20,000 jobs in San Jose alone.
“This is slow. It’s real, but it doesn’t mean a downturn,” says Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “Growth will be slower than before, but the Bay Area will still outpace the nation.”