San Diego County:

Labor Force Growth to Fuel 2021’s Continuing Economic Recovery

As San Diego County’s economy is poised for significantly better growth in 2021, the local labor force (individuals willing and able to work) is expanding — a positive sign for businesses as many unemployed workers “rejoin” the job market in a vote of confidence against COVID-19’s lingering impact.

That’s according to the most recent forecast and trends presented by the San Diego Institute for Economic Research, San Diego Business Journal, University of San Diego’s School of Business, Point Loma Nazarene University’s Fermanian Business and Economic Institute, the San Diego Regional Economic Development Corp., the San Diego Workforce Partnership, and the Burnham-Moores Center for Real Estate (University of San Diego). These experts’ opinions spotlight intriguing viewpoints and projections so your credit union can plan appropriately.

San Diego Institute for Economic Research
Released on Jan. 27 (“San Diego's Economic Shock in 2020 and Forecast for 2021”):

San Diego County’s economic growth will slightly trail the rest of the nation’s rebound in 2021. The local region’s economic growth, in tandem with the state of California, will probably register somewhere between 3 – 3.5 percent gross domestic product (GDP) while the United States hits between the 4 – 5 percent mark. The greater San Diego region, like other coastal regions across the state, fell into a larger recession hole in 2020 compared to other regions in the state and nation due to its higher concentration of leisure/hospitality, tourism, and entertainment job base (yet somewhat mitigated by its vitality in small business creation, technology industries, and a very low unemployment rate going into the 2020 recession — all buffers).

San Diego County’s unemployment rate is forecast to reach 6.5 percent by late 2021 (down from its current 8 percent and substantially down from 15.2 percent in April 2020). The more jobs become available and workers realign to different opportunities in 2021, the more that former workers (due to the COVID-19 pandemic) will “rejoin” the labor market and keep the unemployment rate somewhat elevated (falling at a slow monthly pace). The greater San Diego region had recovered 127,000 of its lost jobs during the pandemic recession by late 2020, but it remains -95,000 jobs short of pre-pandemic numbers (not including growth that would normally occur if a recession never happened). Although two-thirds of local job losses quickly recovered, the balance of other jobs lost will not as easily return as the local unemployment rate’s ongoing decline was already stalling by late 2020.

The longer that San Diego County’s economic recovery is stuck in slow-mode, the greater chance a “full” economic rebound becomes more difficult to reach. Many local businesses were able to absorb the temporary or limited suspension of activity in the initial phase of government shutdowns due to the COVID-19 pandemic, depending on savings and short-term loans. However, the easy adjustments to the variable lockdowns over time and geographies have largely already occurred. Going forward, more businesses will not be able to continue and restore employment the longer that intermittent closures and restrictions continue.

View the full greater San Diego regional forecast report. Make sure to click here to see projected local trends for 2021 (versus 2020 comparison); fading local population growth; employment and labor market outlook; housing market challenges; residential real estate sales; local inflation difficulties; and general summary.

San Diego Business Journal
Presented on Jan. 26 by the San Diego Regional Economic Development Corp. (SDREDC) and Wells Fargo Securities (WFS) — “San Diego: Economic Trends 2021”:

San Diego County’s recovery will slightly outpace the entire state in 2021 due to its economic vitality and diversity of job industries/businesses. The local region will help drive the state forward as California’s economy registers 4.6 percent state GDP (gross domestic product) in 2021 and 4.8 percent in 2022 (very high by recent historical standards over the past 10 years since the economic “hole” to fill was so deep from 2020’s COVID-19 pandemic recession). This measurement of economic growth is very positive; however, employment levels in places like San Diego County and elsewhere will take longer to recover in tandem with GDP/economic growth (forward-looking GDP indicator versus the lagging indicator of employment/unemployment).

The only San Diego County payroll job sector that grew from November 2019 to November 2020 was professional/business services (about 2 percent growth). The least-impacted negative growing employment sectors from the COVID-19 recession last year were construction (0 percent change), financial activities (-4 percent), and education and health services (-4.5 percent). Those in the middle were manufacturing (-5.2 percent), trade/transportation/utilities (-5.5 percent), and local/state government (-6 percent).

The hardest hit San Diego County payroll job sectors from November 2019 to November 2020 were as follows (and will recover in 2021 at varying paces): information technology (-15 percent), “other” services (-17 percent), and leisure/hospitality (-23 percent). Looking at all local sectors combined, total non-farm payroll jobs declined by -7 percent during this period, and by January 2021 the local monthly unemployment rate was still 8 percent (down significantly from April 2020 but still much higher than late 2019 and early 2020’s ultra-low range of 2 to 3 percent).

San Diego County’s “K-shaped” jobs recovery since the 2020 pandemic recession gives a good visual of the labor market dynamics impacting the region (and the entire state). When the recession hit the local economy in March – April of 2020, employment growth for high-wage workers in the county ($60,000/year and more) briefly dropped by -12 percent before rising into positive territory within a few months and remaining there since then (thus following its pre-pandemic growth trajectory) — and about 2.4 percent higher than when the pandemic arrived. Job growth for middle-wage workers ($27,000 – $60,000/year) initially fell by -24 percent before recovering to -3.9 percent by autumn 2020. And for low-wage workers (below $27,000/year), employment growth plunged by -43 percent before recovering to -30 percent by autumn 2020.

View the San Diego regional forecast report, as well as California/United States trends. Make sure to click here to see SDREDC’s presentation from the event and the WFS presentation.

University of San Diego’s School of Business
Hosted on Jan. 14 by the San Diego Workforce Partnership’s 37th Annual San Diego County Economic Roundtable:

San Diego County’s economy is building up a bottleneck of pent-up consumer demand for leisure, hospitality, entertainment, tourism, food/drinking accommodation, and similar services. This demand by local consumers could be unleashed steadily between late 2021 and early 2022, although nobody knows for sure. By the time the consumer services side of the economy starts to reopen more broadly by the middle to end of 2021 (controlled by the spread of COVID-19 or lack thereof), households of all types will still be cushioned by a positive surplus of funds thanks to congressional/federal stimulus, above-and-beyond unemployment aid, home equity, and increased savings in general (due to lower spending over the past year).

Local governments in San Diego County won’t be quite as financially hurt by the COVID-19 recession as previously thought. Although the consumer services side of the economy hasn’t fully recovered, just enough tax revenues come from the goods consumption side that it is significantly (and positively) helping offset the loss from in-person services (leisure, hospitality, tourism, entertainment, etc).

It has been — and will continue to be — important for many workers across San Diego County who are unemployed to find opportunities to transfer their skills quickly into a new job or profession. The skills-transfer and worker realignment discussion is just as relevant to the region as it is anywhere else as it will still take several months for the consumer services side of the local economy to fully come back (or come back as much as possible given the new circumstances and economic/opportunity loss). While thousands of jobs have been “lost” due to fluctuating and variable waves of forced shutdowns and restrictions, other job positions in different sectors (construction, warehousing/logistics, transportation, etc.) may offer the same or higher wages for either the same or similar skillset as a recently unemployed worker has (or for minimal schooling/training or longer-term training and education).

View the full recorded presentation. Make sure to click here to see the entire conference, including an economic forecast and discussion by a panel of local industry leaders. You can view the economist’s slide presentation here.

Fermanian Business and Economic Institute (Point Loma Nazarene University)
Released in late December 2020:

The COVID-19 vaccination rate is becoming the latest closely watched local “economic indicator” for San Diego County. Success in combating the harsh and/or deadly symptoms of the Coronavirus and boosting the economy’s health have become tightly linked. If vaccination rates can reach 70 – 75 percent and “herd immunity” is reached, this would allow key parts of the local leisure and hospitality industry to either restart or open at greater capacity. Local businesses could raise their operating rates, and consumers’ pent-up demand could be unleashed, powering a robust economic upswing (with rising employment and falling joblessness).

San Diego County’s unemployment rate will fall to approximately 5 percent by late 2021 (it’s currently 8 percent after being as high as 15.2 percent in April 2020). Spring and summer should produce much brighter, warmer and healthier economic days across the region. The area’s critical leisure and hospitality sector, which has lost a staggering one-fourth of its workforce since February 2020, should finally start to rebound. “At the Spreckels Organ Pavilion in Balboa Park, we are hoping to resume our regular Sunday afternoon concerts onsite by Memorial Day weekend (May 31),” the forecast report states.

Residents across San Diego County want to get out of the house and spend money. “Most of us have adapted, although many with more difficulty than others, to being confined to our homes,” the forecast report states. “Everybody is anxious, however, to get out of the house and visit with friends and other family members and do the things they used to do before the virus struck.” Local leaders should be on the lookout for a sizable rebound in the economy in 2021, particularly in the second half of the year. Simultaneously, the local median home price should rise to $694,000 (it hit $650,000 by December 2020 — a 13 percent annual increase).

San Diego Regional Economic Development Corp.
Released Jan. 22 (San Diego’s Economic Pulse: January 2021”):

San Diego County’s -5,300 non-farm payroll jobs lost in December is not typical during the holiday season. The unemployment rate jumped to 8 percent in December from 6.6 percent in November amid job losses and growth in the labor force (local pool of teenagers/adults willing and able to work). The region’s “K-shaped” recovery will exacerbate longstanding structural problems in the economy, making the case for an inclusive growth strategy even stronger.

Last month’s jobs decline marks only the sixth time in 72 years where employers in San Diego County let more workers go than they hired in December. The county’s unemployment rate is lower than California’s 8.8 percent rate but significantly higher than the nation’s rate of 6.5 percent. Locally, the causes for the unemployment rise are two-fold: Job losses drove the rate higher; however, this was compounded by an increase in the labor force of 12,200 people (local pool of adults/teens willing and able to work). The labor force vacillated for most of 2020 but ended the year close to its February 2020 pre-pandemic level — which is positive news for the labor market heading into 2021 (if sustained).

Leisure and hospitality employers in San Diego County let go of 9,600 workers in December, which was more than enough to lower total employment that month. The lion’s share of hospitality job losses came from the accommodation/food services sub-category (restaurants and similar businesses), which gave back -10,300 positions. The “other” services, government, manufacturing, educational services (private and non-government), and financial activities sectors all lost jobs as well. However, losses for all of those industries totaled just -4,300, less than half of the layoffs experienced in accommodation/food services alone. The weakness in leisure/hospitality drove an even larger wedge between the jobs recovery for high-paying and low-paying positions, exacerbating a worrisome trend where the local income and wealth gaps will likely widen exponentially as a result of the COVID-19 pandemic recession from last year.

Despite the decline in topline non-farm payroll job employment last month in San Diego County, employment gains were apparent in a number of industries. Business/professional services added a healthy 2,500 workers in December, fueled by a gain of 2,700 in the crucial professional/scientific and technical segment. Meanwhile, retailers brought on 1,900 additional employees despite weak retail sales.

All in all, December’s lackluster employment report for San Diego County was “a downer, but not an unexpected one,” the report states. With COVID-19 cases surging in the region and hospitals running out of valuable space for patients, business restrictions were put in place. “The decline in employment last month may bode well for January’s employment report (coming in mid-February),” the report states. “Under more normal circumstances, January typically reveals job losses as seasonal workers are let go. However, given that seasonal hiring was more tepid in 2020, layoffs in January may be less pronounced.” Labor force growth (pool of local adults/teens who are willing and able to work) in December is also encouraging if it can be sustained. Additionally, despite the sharp drop in leisure/hospitality employment last month, many firms in the region are still hiring. “Therefore, people will most likely remain in the labor force as long as job growth resumes as we enter 2021.”

You can read more. Make sure to click here to see the entire monthly report. Also, view the local Resiliency Tracking indicator for workers, businesses, consumers, and households (a real-time local look at the change in job postings by industry, consumer spending, job losses by wage group, and median home price).

San Diego Workforce Partnership
Released Jan. 22 in the monthly “Labor Market Trends” news update (“Job Experts Assess Year-End Numbers and Look at 2021”):

Despite year-end hiring gains in industries like construction and retail, San Diego County employers cut -5,300 jobs from their payrolls in December relative to the prior month. Correcting for typical seasonal swings, the loss was somewhat less at -3,500, but it still broke a string of four consecutive monthly gains. A new round of lockdowns hit businesses hard, such as restaurants, hotels, and personal service (including hair and nail salons). “Temporary help was a bright spot,” the report states. “When times are tough and uncertain, companies typically look to stop-gap measures until they can gain a clearer picture of what lies ahead.”

Year-over-year comparisons underscore the severity of the blow the Coronavirus has inflicted on San Diego County’s economy. Between December 2019 and December 2020, the region lost -106,000 jobs. This compares to a job loss of about -60,000 at the peak of the last recession in 2009 (click graph/chart webpage links below):

Burnham-Moores Center for Real Estate (University of San Diego)
Presented in December 2020 at the 20th Annual Residential Real Estate Conference:

You can view the full presentation. Please click here to see a comprehensive update and outlook on the 2021 projection from Frank Nothaft, chief economist for CoreLogic (as well as data from real estate analysis firm Zonda/Meyers Research). You can also view the slide presentation here.

Caltrans’ County-Level Economic Forecast
Released in December 2020 by Caltrans (the California Department of Transportation):

You can view Caltrans’ economic, demographic, housing, population, job, inflation, and industry breakdown forecasts for each county. Click on the following to view local trends and projections from 2021 – 2025: San Diego County and Imperial County. Or you can click here to view any county in California.

San Diego County Small Business Activity
Updated routinely by Homebase, a provider of real-time digital tools for small businesses:

Small business activity across the greater San Diego region was down at varying amounts compared to pre-COVID levels as of mid-December 2020. Activity was down -23 to -25 percent depending on the measurement analyzed. In contrast, the region was down between -61 to -74 percent in April 2020 before starting to recover. Measurements include the volume of hours worked by employees, the number of businesses open, and the number of employees actually working. You can click here to learn more and pick your region.

San Diego County: Demographics, Labor, Education & Economic Resources

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