Real estate, construction woes slow Calif. job growth to a crawl
By Dean Calbreath
UNION-TRIBUNE STAFF WRITER
July 21, 2007
Hiring in California was hit by a bad case of June gloom last month as the effects of the real estate slowdown seeped into the job market, according to data released yesterday by the California Employment Development Department.
Statewide, employers added only 400 jobs in June, after adjusting for seasonal fluctuations, compared with a jump of 29,700 in June 2006. Sharp declines in home construction and financial activity – such as mortgage lending – put a crimp in last month's job growth.
San Diego County reported the slowest year-over-year job growth since January 1994, when the county was crawling out of a recession.
In the past year, local employers added 1,600 jobs to their payrolls – one-tenth of the growth rate from June 2005-06. If government jobs are taken out of the equation, the county has lost 1,500 jobs since June 2006.
“Things are looking pretty bad,” said Alan Gin, an economist at the University of San Diego. “It's conceivable in the next couple months that we might see negative job growth – a fall in jobs.”
Unemployment in San Diego jumped from 4.2 percent in May to 4.6 percent in June, just a fraction below the unadjusted national rate of 4.7 percent, but still well below California's unadjusted rate of 5.2 percent. It was San Diego's highest unemployment rate in two years.
Economists pinned the blame for slow job growth on the local housing market. In the past year, home sales declined 24 percent, meaning less work for mortgage and real estate brokers. And applications for residential-construction permits have declined in nine of the past 10 months, meaning less work for builders.
“It really is the real estate market that's causing this,” said Kelly Cunningham, an economist at the San Diego Institute for Policy Research. “Even though job growth in the visitors industry and the professional business sector is still positive, we're losing as many jobs as we are adding.”
For the past year, Cunningham and Gin have been predicting that San Diego would be able to survive the real estate slowdown without falling into a recession. Now they say they are not sure.
“If this trend keeps going on for the next couple months, it would suggest that we might have a recession before the end of the year,” Cunningham said. “Not a big recession, but a slight one.”
Cunningham added that if the number of real estate foreclosures begins to increase substantially – which he doesn't think will happen – a recession could be more severe.
For both the county and California, many of the job losses over the past year were involved in real estate.
Statewide, construction companies shed 5,300 workers last month, contributing to a loss of 12,000 jobs since June 2006. Financial activities – including mortgage and real estate brokerages – lost 5,700 jobs in June, or 7,000 from year to year.
Those job losses were countered by hiring at hotels and restaurants, educational and health services, and professional and business services, resulting in a net increase of 400 jobs.
Economists note that the total may be revised upward, which has happened several times in recent months. And they say it is impossible to judge the strength of the economy by a month's worth of hiring.
“Any one month is not worrisome,” said Steve Levy, who heads the Center for the Continuing Study of the California Economy in Palo Alto. “But if we kept losing jobs at this rate, it would be worrisome. For one thing, slower job growth could play havoc with the state budget next year and the year after, with fewer taxes coming in.”
Kei Matsuda, an economist for Union Bank of California, said some areas in the state are doing better than others.
“For annual job growth, Northern California is accelerating noticeably because of the tech comeback,” Matsuda said. “Tech-related consulting and research and development is very strong, which is why Silicon Valley and the San Francisco metropolitan area have been gaining jobs.”
On the other hand, San Diego, Los Angeles and the Central Valley are all slowing sharply, he said. Locally, the job growth rate slowed from 1.4 percent during the first half of 2006 to 0.6 percent during the first half of this year.
“The San Diego numbers don't look very attractive,” Matsuda said.
In San Diego County, building firms added 900 workers over the past month – largely specialty trade contractors engaged in seasonal renovations. Since June 2006, however, construction firms shed 7,400 jobs. Data for the county are not adjusted for seasonal fluctuations.
Financial and real estate companies shed 400 workers last month, contributing to a decline of 3,500 since the previous June. As was the case statewide, the largest growth area locally was in leisure and hospitality, thanks to the creation of summer jobs. The industry added 3,200 jobs last month for a gain of 6,500 from year to year.
UNION-TRIBUNE STAFF WRITER
July 21, 2007
Hiring in California was hit by a bad case of June gloom last month as the effects of the real estate slowdown seeped into the job market, according to data released yesterday by the California Employment Development Department.
Statewide, employers added only 400 jobs in June, after adjusting for seasonal fluctuations, compared with a jump of 29,700 in June 2006. Sharp declines in home construction and financial activity – such as mortgage lending – put a crimp in last month's job growth.
San Diego County reported the slowest year-over-year job growth since January 1994, when the county was crawling out of a recession.
In the past year, local employers added 1,600 jobs to their payrolls – one-tenth of the growth rate from June 2005-06. If government jobs are taken out of the equation, the county has lost 1,500 jobs since June 2006.
“Things are looking pretty bad,” said Alan Gin, an economist at the University of San Diego. “It's conceivable in the next couple months that we might see negative job growth – a fall in jobs.”
Unemployment in San Diego jumped from 4.2 percent in May to 4.6 percent in June, just a fraction below the unadjusted national rate of 4.7 percent, but still well below California's unadjusted rate of 5.2 percent. It was San Diego's highest unemployment rate in two years.
Economists pinned the blame for slow job growth on the local housing market. In the past year, home sales declined 24 percent, meaning less work for mortgage and real estate brokers. And applications for residential-construction permits have declined in nine of the past 10 months, meaning less work for builders.
“It really is the real estate market that's causing this,” said Kelly Cunningham, an economist at the San Diego Institute for Policy Research. “Even though job growth in the visitors industry and the professional business sector is still positive, we're losing as many jobs as we are adding.”
For the past year, Cunningham and Gin have been predicting that San Diego would be able to survive the real estate slowdown without falling into a recession. Now they say they are not sure.
“If this trend keeps going on for the next couple months, it would suggest that we might have a recession before the end of the year,” Cunningham said. “Not a big recession, but a slight one.”
Cunningham added that if the number of real estate foreclosures begins to increase substantially – which he doesn't think will happen – a recession could be more severe.
For both the county and California, many of the job losses over the past year were involved in real estate.
Statewide, construction companies shed 5,300 workers last month, contributing to a loss of 12,000 jobs since June 2006. Financial activities – including mortgage and real estate brokerages – lost 5,700 jobs in June, or 7,000 from year to year.
Those job losses were countered by hiring at hotels and restaurants, educational and health services, and professional and business services, resulting in a net increase of 400 jobs.
Economists note that the total may be revised upward, which has happened several times in recent months. And they say it is impossible to judge the strength of the economy by a month's worth of hiring.
“Any one month is not worrisome,” said Steve Levy, who heads the Center for the Continuing Study of the California Economy in Palo Alto. “But if we kept losing jobs at this rate, it would be worrisome. For one thing, slower job growth could play havoc with the state budget next year and the year after, with fewer taxes coming in.”
Kei Matsuda, an economist for Union Bank of California, said some areas in the state are doing better than others.
“For annual job growth, Northern California is accelerating noticeably because of the tech comeback,” Matsuda said. “Tech-related consulting and research and development is very strong, which is why Silicon Valley and the San Francisco metropolitan area have been gaining jobs.”
On the other hand, San Diego, Los Angeles and the Central Valley are all slowing sharply, he said. Locally, the job growth rate slowed from 1.4 percent during the first half of 2006 to 0.6 percent during the first half of this year.
“The San Diego numbers don't look very attractive,” Matsuda said.
In San Diego County, building firms added 900 workers over the past month – largely specialty trade contractors engaged in seasonal renovations. Since June 2006, however, construction firms shed 7,400 jobs. Data for the county are not adjusted for seasonal fluctuations.
Financial and real estate companies shed 400 workers last month, contributing to a decline of 3,500 since the previous June. As was the case statewide, the largest growth area locally was in leisure and hospitality, thanks to the creation of summer jobs. The industry added 3,200 jobs last month for a gain of 6,500 from year to year.
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