San Diego’s economy is booming, but don’t just take our word for it. Look at the cranes dotting the skyline, indicative of new development. Notice restaurants packed to the brim, a sign that disposable income is on the rise.
Or, just look at the data.
Recently released data find that the region’s unemployment rate, which had already been trending downward, fell yet again at the end of last year. In Q4 2017, the unemployment rate dipped to 3.3%, down from 4.1% the quarter prior.
San Diego’s unemployment rate has now reached an impressive 17-year low.
To put that in context: the region’s unemployment rate is lower than both the state (4.2%) and national (3.9%) averages. More locally, San Diego fared better than its neighbors in both Riverside (4.1%) and Los Angeles (3.9%).
San Diego’s unemployment rate is the 7th lowest in the nation among the 25 most populous metros (an honor the region shares with Orlando and Washington D.C.) San Francisco earned the top spot in Q4 2017, with an unemployment rate of just 2.7% — not all that much lower than San Diego’s.
What’s more, among that same group of 25 metros, San Diego experienced the second largest year-over-year decline in unemployment (-0.8%).
So, what’s driving this trend?
There are a few employment indicators worth highlighting.
First is the net new number of jobs added to the private sector payroll. In Q4 2017, the region added approximately 22,100 jobs – a 1.5% increase in total number of jobs. This puts San Diego about squarely in the middle of the pack relative to other metros (with Riverside on the high-end at 4.2% and Minneapolis on the low-end with -0.1%).
Second is the shift in seasonal employment. San Diego’s unusually low unemployment rate is driven, at least partially, by seasonal hiring that occurred in Q4 in advance of the holiday shopping season. San Diego’s retail trade had the largest month-over-month increase of all the employment sectors, according to BLS data.
Yet when adjusted for seasonal swings, the San Diego unemployment rate still hovered around just 3.5%, and “showing a jobless rate well below 4% underscores the tightness of San Diego’s labor market,” explains Lynn Reaser, chief economist for the Fermanian Business & Economic Institute at Point Loma Nazarene University.
In order to sustain this near rock-bottom unemployment rate (San Diego’s lowest rate in modern history was 2.6% back in December 1999), the city will need to attract more workers to San Diego. Employers are ready and eager to put down roots in San Diego, but there’s growing concern that if they do so, they won’t be able to find the workforce they need.
“Growth in the long run is really based on bodies, having more workers,” says Chris Thornberg, economist and founding partner of Beacon Economics. Thornberg explains that more housing is necessary if San Diego is going to attract more people to the region.
Thankfully, San Diego IS building more housing. In fact, San Diego apartment deliveries hit a record high in 2017. This might not be enough to satiate pent-up demand, but it is at least a step in the right direction.
The strength of the local economy is an important indicator as to how well a local housing market will perform in the near future. By all accounts, it seems as though the underlying market fundamentals in San Diego will ensure robust employment for the foreseeable future—great news for anyone interested in investing in San Diego-area real estate.
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