A midyear analysis of Silicon Valley and San Francisco Peninsula economic trends shows unemployment is at its lowest rate since the dot-com boom, but job growth has slowed and growth in the labor force has stopped, according to a July update by the Silicon Valley Institute for Regional Studies.
The report looked at key economic indicators, including unemployment, wage gains, month-by-month job growth and housing. Despite challenges, the study found continuing signs that the economy is moving forward in both the promise of new jobs and housing, spearheaded by major employers such as Google, which plans to add as many as 20,000 jobs in San Jose.
The study was prepared by Stephen Levy, senior economist for the Silicon Valley Institute for Regional Studies and director of the Center for Continuing Study of the California Economy. It was jointly published by Joint Venture Silicon Valley. The report looked at the economies in Silicon Valley and San Francisco -- "the Peninsula" economy -- which includes Santa Clara, San Mateo and San Francisco counties.
Job growth has slowed during the past 12 months, the study found. Starting in May 2013, the Peninsula was adding nearly 100,000 jobs year over year through midyear 2015, but from that point on the year-over-year gains through May 2017 had declined to 40,000 jobs, the study found.
But at the same time, unemployment rates sharply declined to levels that have not been seen since the peak of the dot-com boom. Unemployment dropped in the San Francisco metropolitan area from 5.2 percent in May 2013 to 2.6 percent by May 2017; San Jose metropolitan area unemployment dropped from 6.4 percent to 3 percent during the same time period.
But labor force growth -- the number of workers -- came to a halt, adding fewer than 1,000 workers over the past 12 months. Most lower-wage occupations had even smaller gains than the overall 14 percent gain.
There are likely a number of reasons why job growth has slowed, according to the report. Nationally employers have record-high job openings and unemployment is low, an indicator that growth has slowed from a shortage of workers with appropriate skills.
"On the Peninsula this becomes more acute given the very high cost of new housing," the report noted.
Despite slowed job growth, the Peninsula's home and rental prices have grown much faster than wages, a pattern seen throughout the state. Median wages increased 14 percent, but median apartment rents skyrocketed by 45.2 percent from 2011 to 2016. Overall in California, wages increase 5.9 percent compared to rents, which rose by 39.7 percent.
Add to that the dwindling number of housing units: from 2007 to 2017 Silicon Valley added 80,285 units, but it needs 138,146 units to keep pace with population growth, the study found.
The slowdown comes after a huge surge statewide and locally. California represents 12 percent of the nation's population, but it held an outsized share of U.S. jobs and gross domestic product (GDP) growth between 2012 and 2016. The state had 17.1 percent of the nation's jobs and 23.6 percent of the GDP. The Peninsula, and Silicon Valley in particular, were responsible for a large portion of the state's surge. The Bay Area accounted for 2.5 percent of U.S. jobs in 2012, but that rose to 4.8 percent of the national job growth from 2012-2016. Silicon Valley accounted for more than half of that job growth in 2012, with 1.4 percent of the share. Between 2012 and 2016, Silicon Valley garnered three-fifths of the Bay Area's job-growth share.
High and rising shares of important export-oriented businesses spurred state and regional job growth. Statewide those sectors include scientific tech services, software, internet, pharmaceuticals, amusements and motion pictures. These sectors are among those expected to grow the fastest in the nation in the next 10 years, according to the report.
For both jobs and housing, there are signs of continued prosperity: Google and the city of San Jose are planning to bring thousands of jobs, housing and retail to the area between downtown and Diridon station; Mountain View plans to add nearly 10,000 housing units in the North Bayshore area; Santa Clara County passed Measures A and B for low- and middle-income housing assistance and transportation improvements; and Caltrain electrification is moving forward.
On June 21, lawmakers introduced a bill to place a measure before voters for a permanent source of sales tax funding for the railroad, the report noted.
Median wage gains 2012-2016 in Silicon Valley amid low- and middle-wage workers by occupation groups:
Transportation and materials handling: 2.2%
Installation, maintenance and repair: 7.1%
Office and support: 10.5%
Personal care: 5.3%
Food preparation: 16.7%
Education, training and library: 8%
Source: California Employment Development Department