Worker Shortage Holding Back Full Job Recovery in California’s Major Metros

True to Form: Home Prices in the State’s Legendarily Expensive Housing Markets Surged More Than $100K Above Trend During Pandemic

A mounting shortage of workers is the main culprit behind slower job recovery in California’s major metropolitan regions, according to an analysis released today by Beacon Economics. While the inland areas of the state now have more jobs than they did prior to the COVID-19 recession, none of California’s five large coastal metros have reached their pre-pandemic levels of employment.

But they are close, and while these urban areas continue to inch back towards full recovery, says the analysis, each is struggling with a tight labor supply, limiting the ability of local employers to hire the workers they need.

“Any glance at a major job finding site makes it quickly apparent how intensely California employers are trying to hire,” said Taner Osman, Research Manager at Beacon Economics and one of the report authors. “The demand for workers is high, but we don’t have sufficient labor supply, and that is going to continue constraining near-term job growth.”

From best performing to worst, San Diego County has now recovered 99.5% of all the jobs it lost during the pandemic recession, the South Bay/Silicon Valley has recovered 98.1% of its jobs, Los Angeles and the East Bay/Oakland have both recovered 97.3% of their jobs, and San Francisco trails with a recovery rate of 96.6%. With the exception of San Diego, all are trailing California as a whole (98.9% job recovery) and the nation (99.5%).

As with last edition of this analysis, each metro is forecast to reach or surpass pre-pandemic job levels in the first half of 2023 (San Diego by the end of 2022). The relative sluggishness of their recovery can be better understood in the context of record-low unemployment rates.

With the exception of Los Angeles, the state’s largest coastal metros currently have unemployment rates that are at or close to historic lows: San Francisco 1.6%, South Bay 1.7%, and San Diego and the East Bay 2.4% (unemployment in LA is higher than it was pre-pandemic, due in part to a slower recovery in that region’s all-important Leisure and Hospitality sector).

“Unemployment rates are defined by the number of people actively looking for work who are not currently employed” said Osman. “Those rates are so low in nearly all of California’s largest metro areas, they can’t fall much further, and these conditions are reflected in the inability to hire enough workers.”

The analysis also examines the red-hot housing markets in the state’s coastal metros, forecasting that while home prices will continue rising in the near-term future, at least the rate of price appreciation will cool.

According to the analysis, high demand throughout the pandemic pushed price growth in most of the regions studied above their already steep, upward pre-recession trend. In these metros, prices are estimated to be approximately $127,000 to $169,000 higher than they would have been had it not been for the pandemic and the economic effects it spawned. San Francisco is the one metro where prices did not rise above trend, but that may be a function of the region’s already exceptionally ‘vertical’ price growth.