California Posted Solid December Employment Growth, Prompting Optimism for 2019

January 22, 2019

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  • California added 24,700 jobs in December, to end the year with 284,300 new positions in 2018 according to the latest numbers from the state Employment Development Department. That represents a 1.7 percent increase from the year before compared with the 1.8 percent growth recorded nationwide. In the nine years since the economic expansion started, the state has created a total of 3,097,600 jobs.
  • The state’s unemployment rate edged up to 4.2 percent, though the increase was due to a gain in California’s labor force, which grew by 75,800 during December. The recent increase in the labor force is promising for Golden State employers, since the tight market was largely responsible for many unfilled positions across the state. Also, with the recent labor-force growth, the 2019 employment picture looks more promising.
  • Nine out of 11 industries added jobs from November; leisure and hospitality was the top gainer (up by 9,500 jobs),followed by education and health services (up by 7,900 jobs).
  • Job losses over the month were concentrated in the construction industry — which shed 1,300 jobs — and other services, with 300 positions lost.
  • Over the year, 10 of California’s 11 industries added jobs. The largest gains remained in the professional and business services sector (up by 82,500 positions for a 3.2 percent increase),education and health services (up by 67,900 jobs for a 2.5 percent increase),and leisure and hospitality (up by 56,300 jobs for a 2.8 percent increase).
  • Only other services posted an annual decline, with 3,900 fewer jobs compared with last year.
  • San Francisco and San Mateo counties added a total of 24,500 jobs in 2018 for a 2.1 percent increase. The region continued to post gains in the professional, scientific, and technical services and information sectors, which accounted for almost half of the total jobs added. The leisure and hospitality industry followed, contributing one-fifth of all jobs added — mostly in food services and drinking places. The rest of the gains were in the private educational and health services, state educational services, and financial activities industries.
  • The San Jose metropolitan area — including Santa Clara and San Benito counties — ended 2018 as one of California’s fastest-growing job markets, with 37,000 jobs added for a 3.3 percent increase from 2017. Similar to its neighbor to the north, San Jose posted big gains in the tech sector, with most jobs added in professional, scientific, and technical services (up by 9,100 jobs). The private education and health services, information, and manufacturing industries followed. The only sector to post an employment loss was trade, transportation, and utilities.
  • Alameda and Contra Costa counties benefited from a continued increase in the professional and business services industry, which added about half of the 24,000 new jobs in 2018, a 2 percent increase from the previous year. Other major industries that posted significant increases included private educational and health services; trade, transportation, and utilities; construction; and manufacturing, while financial activities posted a decline.
  • Marin County also finished the year on a strong employment note, with total 4,300 jobs added over the year, a robust 3.7 percent increase from 2017. While all sectors posted gains, the largest was in leisure and hospitality, while mining and logging and financial activities remained on par with the year before.
  • Napa and Sonoma counties saw slower employment growth over the year due to the October 2017 wildfires. Napa County posted a 0.1 percent employment increase over the year, with some gains in the leisure and hospitality; professional services; mining and logging; and construction sectors. In Sonoma County, employment growth reached 1.8 percent, and gains were focused in educational and health services, while losses were seen in the trade, transportation, and utilities; government; and professional and business services sectors.
  • Los Angeles County added 60,000 jobs in 2018, which was a 1.3 percent annual increase. About one-third of the gain came from the leisure and hospitality sector — with accommodation and food services reaching record-high employment — while arts, entertainment, and recreation also added solidly to the growth. Gains in the professional and business services sector, which was responsible for less than one-third of the overall growth, were driven by increases in administration and support and waste services. Lastly, growth in the educational and health services industry, which also added less than one-third of the new positions, was driven by upticks in health-care and social-assistance jobs. The government sector had the largest loss among those with declines, with drops observed on all three levels. 
  • Table 1 summarizes December year-over-year employment changes by California metro area by three sectors:  professional and business services and information and financial services (high-income); construction; and leisure and hospitality. The table also shows the number of housing permits that were added over the year, as well as the number of households. The last column indicates the supply-and-demand ratio between housing permits and households. A ratio greater than one suggests that more households were added in a region than housing permits, thus perpetuating California’s housing imbalance. San Jose, with a ratio of 3, is still the Bay Area’s most undersupplied housing market, while Napa County added a solid number of new housing units, resulting in a greater balance. 

Table 1: Employment statistics in major California metropolitan areas, 2018 versus 2017

East Bay Area, CA includes Alameda and Contra Costa counties

Los Angeles, CA includes Los Angeles County

San Francisco, CA includes San Francisco, Marin, and San Mateo counties

Selma Hepp is Compass’ Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY),Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.