The Bay Area job market powered to robust gains during February, an upbeat report that arrives just ahead of what’s expected to be a coronavirus-spawned string of grim setbacks and brutal employment losses for the region’s economy.
Bay Area employers added 8,000 jobs in February, gains that were led by Santa Clara County and the San Francisco-San Mateo region, but the timing of when state officials conducted their research doesn’t reflect job losses that are already underway due to the coronavirus outbreak.
In February, Santa Clara County gained 4,000 jobs, the San Francisco-San Mateo region added 3,200, while the East Bay gained 200, the state Employment Development Department reported Friday. The gains extended to all seven metro areas in the region. Santa Cruz County added 1,000 jobs while Monterey County gained 500. All the numbers were adjusted for seasonal fluctuations.
“The Bay Area is in a great position as it enters the coronavirus downturn,” said veteran economist Christopher Thornberg, a Beacon Economics founding partner. “The at-risk jobs that are being affected are in lower quantity than other regions.”
California added 29,000 non-farm payroll jobs during February, while the statewide unemployment rate remained at an all-time record low of 3.9 percent, the EDD reported.
Echoing the Bay Area prospects, California has entered the regimen of job losses due to the coronavirus in good shape, according to a joint assessment of the Golden State’s economy by Beacon and UC Riverside.
“Like everywhere in the country, the Bay Area will experience short-term disruption, but it does enter this crisis from a position of unparalleled economic strength, which should make its recovery quicker than in other places,” said Taner Osman, research director for Beacon Economics.
Even some commercial real estate sectors in the Bay Area might weather the economic catastrophe that now lurks, said economists with CBRE, a commercial real estate firm.
“Some office markets may be more insulated, based on their main industry drivers of leasing activity,” said Richard Barkham, CBRE’s global chief economist. Numerous studies and reports identify the tech industry as the primary propellant for office leases and property purchases in the Bay Area, and notably, Silicon Valley.
Still, the coronavirus has imperiled California’s record-setting performance and unprecedented economic expansion, if Gov. Gavin Newsom is correct with his estimate that state agencies have received roughly 1 million applications for unemployment benefits over a roughly two-week period starting around March 13.
In February, California had 759,000 unemployed residents who were part of a total labor force of 19.5 million in the state. That means the number of unemployed residents might currently be in the range of 1.8 million people.
If the number of unemployed residents was to reach the 1.8 million range, and the labor force remained at the same level of 19.5 million, that would point to a jobless rate of 9 percent, which would be on the cusp of the double-digit unemployment levels that are often associated with a severe economic downturn — or worse.
The prospect of job cuts in the Bay Area and nearby regions has already emerged, according to a state agency’s labor report this week.
Hotels, spas, stores, and restaurants in Northern California are among the employers that revealed plans this week for job cuts totaling in the thousands for the Bay Area and nearby regions amid the coronavirus outbreak.
Rosewood CordeValle of San Martin, Carmel Valley Ranch of Carmel, and Ventana Big Sur were some of the high-profile names that issued warnings they were planning layoffs, the latest grim reminder of the economic devastation spawned by the coronavirus.
In most instances, these businesses were planning temporary closures or layoffs, typically citing the economic impact of the coronavirus situation as a key factor.
Although the Bay Area is poised to ward off at least some of the effects of the coronavirus, it nevertheless is home to an array of industries that are particularly vulnerable, according to Mark Vitner, Wells Fargo senior economist.
“Hotels, restaurants, stores, companies involved with travel and international trouble, are being hit hard in the Bay Area,” Vitner said. “But the tech sector should hold up reasonably well. Large tech companies are holding off on layoffs because they want to hang on to their employees.”
Thornberg made it clear that the coronavirus poses severe hazards for the nation’s economy.
“Clearly, the coronavirus is the most substantive true negative shock to the economy in the last 10 years,” Thornberg said. “By far and away, this is the real deal, if the disease gets out of control. But that’s the whole point of what we are doing, to prevent that from happening. As soon as we turn the economy back on, for the most part the jobs will come back.”
The timing for a rebound for the U.S. economy could be as soon as the July-through-September period, after a severe plunge in the April-through June quarter, Thornberg predicted.
“Beacon Economics is predicting a very negative second quarter and a very positive third quarter,” Thornberg said. “By 2021, this will be a distant memory.”
Thornberg also emphasized that the distributed nature of the tech sector could bolster the Bay Area as job cuts loom.
“It is no big deal for the tech employees to work from home,” Thornberg said. “The Bay Area’s tech workers have higher wages, so they are better protected from this.”