Strong Regional Job and Population Growth Continues | Invest & Innovate | Steve Levy | Palo Alto Online |

Local Blogs

Invest & Innovate

By Steve Levy

E-mail Steve Levy

About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

View all posts from Steve Levy

Strong Regional Job and Population Growth Continues

Uploaded: Dec 20, 2014
The state and Bay Area saw exceptional job growth in November?over 90,000 jobs in the state and 23,000 in the region. While one month is not a trend the growth over the past year and past four years is a trend that says the economy is strengthening. In the Bay Area the economy is surging when measured by job growth and reductions in unemployment rates. Over 400,000 jobs have been added in the past four years.

Some recent data are summarized here Jobs memo.

The best piece of news from my perspective is that Bay Area job growth is strong enough to both reduce the unemployment rate and allow workers who dropped out to rejoin the workforce. Over the past 12 months the Peninsula and East Bay labor force has added 84,000 workers, far more than came from population growth alone. At the same time the unemployment rate declined in the East Bay from 7.1% to 5.7%, in the SF metro area that includes San Mateo County from 5.3% to 4.2% and in the San Jose metro area from 6.3% to 5.2%.

And in the year ending in June 2014 Santa Clara, San Mateo and San Francisco counties were ranked in the top four for average wages, the top five for dollar wage gains and in the top 5% for percentage wage increases.

Challenges remain. The economic boomlet?(the peninsula economy now has 10% more jobs than before the recession)?has caused rapid and challenging increases in housing prices and rents as well as traffic. Moreover, the wage gains to date have been concentrated in workers already earning high wages.

Residents and policy leaders should expect at least two more years of substantial job growth before the pace will slow. This outlook is broadly shared among economists. A few quotes from today's Mercury News report:

"The quality of the job growth really stands out to me" Jordan Levine, Beacon Economics. "The industry diversity in job growth means the growth is resilient" Tracey Grose Bay Area Council. ""The Bay Area is knocking it out of the park in the job creation department" Scott Anderson Bank of the West. "It is a very broad based and sustainable recovery".

For the first time since the 1850s the Bay Area is the state's population growth leader confirmed by new population growth estimates released in December for 2014. I will write more about this in a later blog. But one implication is clear. With job growth continuing and unemployment rates having declined substantially, the next round of growth will bring more new residents to the region.

The last time housing was more affordable and the commute hour less congested was in the midst of the recession.

The challenge for residents and elected officials throughout the region is to address the region's housing and transportation challenges while preserving the economic vitality that makes the Bay Area economy what other regions strive to be like.

Comments

 +  Like this comment
Posted by jobs?, a resident of College Terrace,
on Dec 20, 2014 at 6:25 pm

Steve, do you know what types of jobs (tech, retail, service industry, healthcare, etc) were added in the Bay Area and Palo Alto specifically?


 +   1 person likes this
Posted by Milton, a resident of Crescent Park,
on Dec 20, 2014 at 6:52 pm

Steve, How many of the new jobs in November were low-wage part time retail sales positions in advance of Christmas? This is a known phenomena every year. To cherry pick this one months worth of data in isolation does not paint an accurate pictures. Even you acknowledge that one month is not a trend. What about the prior decade of data from 2000-2010 when there was a significant long term decrease in jobs and population? Should we ignore that?

Is there some reason that you believe that you can extrapolate long term trends from one month or one year of data? How is this a solid basis for making policy recommendations?

How much are you influenced by the government agencies that pay you to produce these conclusions?


 +  Like this comment
Posted by Garrett , a resident of another community,
on Dec 21, 2014 at 9:17 am

Even without seasonal jobs counted the bay area has done well in job creation in the last 12 months.


 +   1 person likes this
Posted by stephen levy, a resident of University South,
on Dec 21, 2014 at 11:02 am

stephen levy is a registered user.

Good question "jobs"

Here is some data for our metro area for last month, the past 12 months and the past 4 years. For the past month there was a jump in retail jobs as is normal for November. But the data show that lower paying jobs such as retail and food services have been a small part of the metro area gains over the past one and four years. There is a heavy concentration in information and professional, scientific and technical services (PSTS) as well as in health care and social assistance. Construction and manufacturing have posted gains as well.

Two sectors--finance and retail--are undergoing long term structural changes from Internet competition and have shown no job growth since before the recession.

Job Growth in San Jose Metro Area

Month Year 4 Years
Total 8,100 37,300 131,400
Construction 300 900 7,800
Manufacturing 1,100 4,300 8,200
Retail Trade 3,600 100 3,400
Information 1,100 7,700 18,700
Finance 500 1,800 3,000
PSTS 3,200 7,000 22,700
Other Bus. Serv.-600 2,600 13,300 Health Care,Soc. Asst. 500 5,600 23,800
Food Services 900 2,300 12,900
Government 700 1,500 -700

Compared to the state and nation this is a very strong pattern of job growth and explains why Santa Clara County is among the five best counties measured by average wages and wage gains.

EDD does not publish jobs by industry below the county level. The San Jose metro area data is comparable to what was experienced in the San Francisco metro area. For data geeks, the EDD jobs data website is [Web Link EDD job site]


 +  Like this comment
Posted by stephen levy, a resident of University South,
on Dec 21, 2014 at 11:14 am

stephen levy is a registered user.

Garrett is correct.

Let me first explain what seasonally adjusted means. If an industry like retail normally adds 3,600 jobs in November as the San Jose metro area did this year, there is no seasonal adjustment. If retail had added 5,000 jobs that would have shown up in the seasonally adjusted series as a gain of 1,400 and vice versa. The large seasonal adjustments are school closings and openings in the summer and seasonal hiring and layoffs from November through January.

But EDD does have a seasonally adjusted series for our metro area and the Bay Area.

Last month the San Jose metro area added 8,600 jobs seasonally adjusted and the Bay Area gain was 23,300--very large numbers historically.

But it is better to look at longer periods. For the past 1 and 4 years our metro area (Santa Clara accounts for 98.5% of the jobs) has added 37,400 and 148,200 jobs while the Bay Area has added 114,500 and 453,700 jobs in these periods.

Moreover, with 2014 being the second highest VC funding level in history and companies like Google and others buying land and planning for expansions, the regional job surge is likely to continue for another two years before slowing as baby boomers retire in greater numbers.


 +  Like this comment
Posted by stephen levy, a resident of University South,
on Dec 21, 2014 at 11:26 am

stephen levy is a registered user.

Milton raised the question of whether it was prudent to expect continued growth based on recent trends. I have tried to explain some of the reasons why I and other economists expect at least two more years of strong growth.

My expectations are shared by others. Interested readers can sample some comments from other economists about recent trends and implications for the near term future.

[Web Link LA Times]

[Web Link Sacramento Bee]

[Web Link Orange County Register]

As far as the 2000-2010 period the Bay Area had two large recessions. If city and regional planners think it is prudent to plan for two large recessions in the coming few years, they are free to do so against the advice of economists and businesses in the region but I doubt that will happen because the planners as well as residents understand and experience the strength of the regional economy sometimes in pleasant and sometimes in unpleasant (housing prices and traffic) ways and both are real.


 +  Like this comment
Posted by Garrett , a resident of another community,
on Dec 21, 2014 at 1:08 pm

While job growth is good and wonder how many kids who are in middle or high school will be needing jobs. I am one who supports job creation, low unemployment and encouragement of infrastructure investment. While these numbers are extremely good for those who attended a 4 plus year college.

My point and Mr. Levy is pointing put housing and infrastructure. In the last 4 years the amount of jobs created is more the housing units approved. Also want to point out not much in the way of new freeway or transit miles have been planned, funded, and opened for service.

If we do have recession and another growth spurt which will happen?


 +  Like this comment
Posted by curious, a resident of Menlo Park: Central Menlo Park,
on Dec 23, 2014 at 4:38 pm

What happens if "jobs growth" outpaces infrastructure and housing growth? It feels as if our roadways are near capacity now, and new commercial buildings in the works even though a lot of existing ones remain vacant, and new housing projects do not seem to be coming along as quickly.
Palo Alto has been concerned about losing "real" retail (not restaurants) to offices. If this pattern spreads, should we worry about where residents can shop?


 +  Like this comment
Posted by Garrett, a resident of another community,
on Dec 23, 2014 at 9:56 pm

Job Growth has already outpaced housing and transportation infrastructure to where people are moving further and further away from the original core cities of Silicon Valley. San Francisco is a major employment center outside of Silicon Valley and are having problems with commutes coming in or going out.

Building a Caltrain line from the Central Valley to the cities will take too long and will cost lots money.


 +  Like this comment
Posted by stephen levy, a resident of University South,
on Dec 24, 2014 at 12:46 pm

stephen levy is a registered user.

Yes job and population growth has outpaced housing growth because cities are not allowing enough housing to be built. It is a regional problem but cities have control over zoning and incentives/permission for housing. Not enough housing is more a political question than a technical challenge. It is a solvable challenge although costs will remain high though allowing smaller units can help some.

transportation capacity for cars and public transit has also not kept up with growth leading to local and regional challenges around traffic and parking congestion. There is some effort to increase capacity for moving people with freeway land expansions, new BART stations and efforts to expand CalTrain capacity. There are also private solutions like the Google buses and some cities are expanding local shuttle capacity. Palo Alto is looking into several approaches to dealing with traffic and parking.

Most infrastructure solutions involve public investment/funding. Palo Alto is implementing a major infrastructure investment program and other cities are as well.

The questions raised about the challenges of job growth are why this blog is titled Invest or Die.

Yesterday's strong GDP report of 5% real growth following 4.6% in the second quarter is a reminder that the economy continues to strengthen here and across the country.

The challenge in Palo Alto and our region is to successfully address the housing, infrastructure and quality of life pressures created by the strong economy while preserving the economic vitality that has been created by companies and workers here producing goods and services in demand worldwide.


 +  Like this comment
Posted by curious, a resident of Menlo Park: Central Menlo Park,
on Dec 26, 2014 at 4:59 pm

Don't most cities allow quite a bit housing but they don't use zoning rules to encourage it, such as by putting limits on other uses that might appear in today's market to be more lucrative to developers or property owners?


 +  Like this comment
Posted by stephen levy, a resident of University South,
on Dec 27, 2014 at 11:18 am

stephen levy is a registered user.

Hi Curious,

My experience is that it is the other way around. Most communities have residents who fight more housing. But if you have examples of cities going for housing over office development, please share.

The latest local example that I know about is the Mt.View council allowing the San Antonio center owner to proceed with office and hotel development without requiring housing that had previously been supported by the council.


 +  Like this comment
Posted by curious, a resident of Menlo Park: Central Menlo Park,
on Dec 29, 2014 at 8:46 am

Steve - sorry I was not more clear. I agree with you that that through zoning, cities allow a lot of housing, but they also allow a lot of offices and other uses on the same sites. Thus the zoning lets "the market" decide instead of zoning that limits other uses unless the projects include a certain amount of housing. Isn't that the only way out of the imbalance?


 +  Like this comment
Posted by stephen levy, a resident of University South,
on Dec 29, 2014 at 4:32 pm

stephen levy is a registered user.

Curious--sorry if I did not get what you were asking.

Yes, cities can provide incentives for housing through zoning and can negotiate with property owners to condition office development on including housing. That was what was going to happen at San Antonio center but did not.

One problem is that city staffs often lack the information to negotiate successfully with developers because they do not have access to the financial details of proposed projects.

On the other hand cities can provide incentives for housing as they have done for some commercial projects--allowing higher height and density limits, providing zoning incentives for studios or housing for seniors, which includes many types of housing.

One problem here is that some people want neither offices or much housing. So it is harder to make the kind of shift to less office and more housing.


 +  Like this comment
Posted by Crescent Park Dad, a resident of Crescent Park,
on Jan 3, 2015 at 7:46 am

"On the other hand cities can provide incentives for housing as they have done for some commercial projects--allowing higher height and density limits, providing zoning incentives for studios or housing for seniors, which includes many types of housing."

Therein lies the rub.

The current voting public has had it with developer incentives, increased density, ARB and city council decisions. Certainly most of the negative energy has been focused on commercial development, but the Measure D results indicate that PA residents aren't going to go for any exceptions - commercial or housing. Plus we are seeing a lot of push back on projects that replace smaller buildings with larger projects...but are approved as they qualify under current zoning requirements (e.g., Sherman Ave).

If I'm a member of PAF, I wouldn't try to change height or density limits...the majority of residents would just vote it down Measure D style. . Instead I would try to get the city to change the zoning in the "commercial" districts to be housing only or some sort of extremely high ratio of housing. The commercial developers would fight it tooth and nail. But I would think that residents would be more open to additional housing if the city kept the current limits and replaced the office development with housing efforts.


Sorry, but further commenting on this topic has been closed.

Couples: Do These for 80% Chance of Divorce
By Chandrama Anderson | 0 comments | 1,336 views

Tips for the Best Latkes
By Laura Stec | 3 comments | 1,151 views

 

The holidays are here!

From live music to a visit with Santa, here's a look at some local holiday activities to help you get into the spirit of the season.

VIEW