Retail’s Slide Continues; No Affordability Relief As Home Supply Remains Low
December 19, 2019—LOS ANGELES, CA—Despite increasingly tight labor markets and historically low levels of unemployment, all of California’s major metropolitan areas have continued to add new jobs, according to a regional outlook released today by Beacon Economics. Led by a handful of industries including Professional & Business Services and Education & Health Services, annual job growth as of October 2019 (the latest data available) ranges from 3.5% in the powerhouse economy of San Francisco to 1.3% in the massive Los Angeles market.
While some major metros, and other areas of the state, have seen job growth slow compared to past years, both San Diego and the East Bay posted annual growth that is slightly higher than their post-recession averages. “It’s important to note that this is all happening amidst tightening labor markets and little to no growth in the workforce,” said Adam Fowler, Director of Research at Beacon Economics. “Although prognostications that a recession is imminent seem to be all around us, the data we see coming out of California’s largest urban centers does not support that storyline – at least not in the foreseeable future.”
Across metros, perhaps the most battered industry is Retail Trade, which experienced declining annual employment everywhere except the South Bay and East Bay. In the East Bay, retail employment tracked into positive territory for the first time since September 2018. “Retail’s overall decline essentially follows a long-term trend that is the result of an industry disrupted by e-commerce and fundamental changes in the way consumers make purchases,” said Fowler.
While the picture is generally bright for job growth, the high-priced housing markets in the state’s major metros continue to challenge would be homebuyers and will likely constrain future workforce growth. Although the most recent numbers show home price appreciation has moderated or contracted across most metro areas (with the exception of Los Angeles in a unique trend reversal), the available supply of homes remains low, putting upward pressure on prices and keeping them in a range that is out of reach for the majority of California residents.
Moreover, single-family homebuilding activity has been lackluster across all of the state’s major metro areas. And although the issuance of multifamily building permits has been much more robust, rental costs in every major metro have risen considerably indicating that despite increased supply, new rental units are being quickly absorbed.
“These look and act like low-supply, high-demand markets,” said Fowler. “Unless we add to the housing stock at a meaningful level in these regions, as well as in other areas of the state, unaffordable prices will continue to be the norm and ultimately will constrain economic growth in California.”
For complete findings, please view the full reports for the East Bay, Los Angeles, San Diego, San Francisco, and the South Bay/Silicon Valley attached to this email.
Beacon Economics LLC is an independent economic research and consulting firm based in Los Angeles. Learn more at www.beaconecon.com.