Employers jettisoned thousands of Bay Area jobs in August, state labor officials reported Friday, and economists warned that the spike in home prices could crimp employers’ ability to hire workers in the nine-county region.
The Bay Area lost 4,700 jobs last month — the worst month for employment losses in seven years, according to seasonally adjusted figures from the Employment Development Department.
“The main constraint on economic growth right now is housing,” said Robert Kleinhenz, executive director of economic research with Beacon Economics and UC Riverside’s School of Business. “And it doesn’t matter if you are a homeowner or a renter. The rent burden is also quite high across the state and in the Bay Area.”
Economists explained the housing and transportation constraints on job growth this way: In both strong and weak job markets, some employers are hiring and others are dismissing workers. When the ability of employers to hire people is restrained — in this case because it’s tough to find affordable housing — upswings in hiring are less able to offset the jobs that vanish due to employment reductions. And that can cause sharp swings from month to month.
Employers slashed 3,000 jobs in Santa Clara County and another 2,000 in the San Francisco-San Mateo area.
The East Bay, however, bucked the grim trend by adding 800 jobs, according to the EDD.
Even if companies have openings, new jobs aren’t reflected in employment statistics until people are actually brought on board — and experts said it’s proving more difficult to recruit for many types of jobs as Bay Area housing costs soar.
“It’s getting tougher for companies to hire folks who are not in the highest earning levels, people who are not in creative and technical classes,” said Mark Vitner, a senior economist with San Francisco-based Wells Fargo Bank. “For a lot of folks, they can’t afford to live anywhere close to where their job is. Sometimes, they can’t afford the cost of commuting.”
The 4,700 jobs lost in the Bay Area was the worst single month for the nine-county region since its employers eliminated 15,000 jobs in July 2010, at a time when the region had just begun to banish the ill effects of the Great Recession.
California also stumbled into employment losses in August, losing 8,200 jobs. The statewide unemployment rate worsened last month and increased to 5.1 percent from 4.8 percent in July, the EDD reported.
The Bay Area job losses last month were scattered among an array of industries, according to a Beacon Economics analysis of the EDD figures.
Santa Clara County’s strongest industry in August was the technology sector, which added 600 positions. The weakest industries in the South Bay were hotels and restaurants, which lost 1,800 jobs; construction, which eliminated 600; and retail, which shed 400 positions, the Beacon analysis showed.
The East Bay’s strongest sector was health care, which added 2,400 jobs. The most feeble industry in Alameda and Contra Costa counties was construction, which chopped 1,500 jobs.
But in the San Francisco-San Mateo region, construction was the strongest industry in August, adding 1,600 jobs. That region’s weakest industries were technology, which slashed 2,100 jobs, and health care, which lost 1,200 positions, Beacon estimated.
“The Bay Area and California are at full employment, which means that none of the metro regions of the Bay Area are going to grow at the torrid pace they experienced in recent years,” Kleinhenz said.
Other experts predicted that the current seesaw pattern of employment changes in the Bay Area could continue, due to the saturated employment picture in the region.
“We are seeing more monthly ups and downs as the pace of job growth levels out,” said Jeffrey Michael, director of the Stockton-based Center for Business and Policy Research at University of the Pacific.
Case in point: Prior to the August job losses for the Bay Area, the region added 17,700 jobs in July.
The job market’s ups and downs “should continue since housing and transportation place physical limits on labor force growth in the Bay Area,” Michael said.
Michael estimated that the Bay Area’s regional jobless rate was 4 percent in August, well below the California unemployment rate of 5.1 percent.
Yet experts said they don’t believe the region’s job market is headed for a recession.
“We don’t think this is a turning point in the economy, and a recession is not in the cards,” Kleinhenz said.
Still, without a doubt, job growth has slowed drastically in the Bay Area, experts said. That’s demonstrated by a comparison of employment growth over the first eight months of 2017 compared with the first eight months of 2016.
“The Bay Area job engine is slowing, and it’s not a one month and done phenomenon,” said Scott Anderson, chief economist with San Francisco-based Bank of the West. “The period of job growth outperformance for the Bay Area is over for a while.”
During the first eight months of 2017, job totals increased at an annual rate of 1.6 percent in Santa Clara County, 2.1 percent in the East Bay, 2.4 percent in the San Francisco-San Mateo region and 1.7 percent in California.
Over the first eight months of 2016, job growth was 3.3 percent in Santa Clara County, 3.4 percent in the East Bay, 4.4 percent in the San Francisco-San Mateo area and 2.9 percent in California, according to a Beacon analysis of the EDD statistics.
“There is indeed a slowdown in job gains across the board, and housing is the driving restraint,” Kleinhenz said. “Housing is not just expensive for entry-level workers, it’s expensive for even a well-paid technical worker in high tech in the Bay Area. They will be paying top dollar for their home.”