Southern San Francisco/Bay Area:

Job, Wage Growth Come at a Cost to Housing, Congestion and Lower-Income Issues

As the broader economy slows down, the southern Bay Area/San Jose region is far from running its course. However, the brake-neck pace of employment and wage growth is still coming at a widespread cost to all income-level groups through housing inflation, commuting, congestion, and other issues.

That’s according to presenters at the 9th annual Economic Summit hosted by San Jose State University in June (and forecasted by Beacon Economics). The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Santa Clara County/Bay Area
Presented by Beacon Economics:

As the broader economy is forecasted to slow down, the Southern Bay Area’s economy (Santa Clara County and nearby) is in a fairly strong position. The Southern Bay Area’s employment growth over the past 12 – 18 months was one of the highest not only in the region but throughout California. The unemployment rate has remained in record low territory despite moderate growth in the labor force — a sign of the large demand for workers in the region. This demand is further reflected in the strong growth in annual average wages that are some of the highest in California.

Although the Southern Bay Area has plenty to boast about, the region shares some concerns with the vast majority of California. A housing shortage has driven up home prices considerably and made housing unaffordable to many would-be homeowners. These concerns have led many to rely on commuting to work in the region, straining already congested traffic. “Because demand for technology workers and high-skilled labor is expected to continue, the region will need to bolster its supply of housing,” the forecast report states.

If many parts of the San Francisco/Bay Area are plagued by extremely high housing purchase and rental costs relative to household incomes, the San Jose area could be one area helping buck this trend — a little. Median monthly rent as a percentage of household income was 29 percent in 2017 in the San Jose region (up from 27 percent in 2008). This was lower than California (33 percent). Median monthly homeowner payment cost as a percentage of household income in the same regions, respectively, were 20 percent and 22 percent (lower in the local region than the state). It shows that while many struggle with high housing costs, some of this trend is offset by high-paying jobs (although even many high-skilled workers have to “room” with each other to live locally).

When it comes to domestic migration, Santa Clara County has lost a net total of more than 50,000 low- and middle-income residents from 2012 – 2017. These are mostly individuals who earn $50,000 and below in annual wages. Filtered by educational attainment, the county’s net migration loss was with anyone holding a bachelor’s degree or less (mostly the “some college” and “high school graduate degree” crowd). On the flipside, the highest domestic in-migrant individuals were those making $50,000 – $150,000 annually (and a slight uptick in those earning more than $150,000). This latter group mostly equates to anyone holding a graduate or doctoral degree. However, housing-cost burden examples exist at nearly all income levels in the general vicinity.

Employment in the San Jose metropolitan region hit an all-time high of 1.14 million workers in early 2019 (compared to the old 940,000 peak in 2008). The information industry continues to outpace all other local job categories. Other strong sectors include professional/scientific/technology, hospitality, government, finance, and real estate. Some of the highest local wage earners are garnering an average-annual $118,000 – $323,000 depending on which workforce they are a part of (computer systems design, software publishing, surgeon/medical professionals, company/firm management, and other jobs. Median household income in the San Jose area hit $119,000 in 2017, higher than San Francisco ($101,000), Santa Cruz ($80,000), and California ($71,000).

Click here to view slide presentation trends within the Bay Area/San Jose/Santa Clara County and other local regions (slides 44 – 69) presented by Beacon Economics: total nonfarm employment, growth, contraction, and job breakdown; labor force and unemployment rates; industry breakdown in wages and growth; venture capital; commercial real estate values, permits, rents, vacancies and categories; new housing supply and population ratios; residential real estate prices and apartment rents; household income, median earnings, and cost burden; migration patterns; work commuters; and builder density/building incentive issues. Other trends are available on the United States (1 – 36), California (37 – 43), and combined California/United States (70 – 71).

Click here to view the Santa Clara County Regional Intelligence Report.

Click here to view a commercial real estate slide presentation by Matthew Mahood, CEO of The Silicon Valley Organization. The organization provides services in networking and business viability; public policy advocacy; economic development strategy; community development; and political action.

Click here to read “Bay Area Construction Costs May Finally Be Plateauing,” recently published by the Silicon Valley Real Estate News section of Bisnow. The San Francisco/Bay Area experienced a nearly 7 percent jump in construction-cost growth in 2018, making it the most expensive place in the world to build. Additionally, the recent 2019 International Construction Market Survey (by Turner & Townsend) highlights the San Francisco/Bay Area and other regions in its analysis of building data and trends in construction-labor skills shortage, preliminaries and margins, the most costly markets, global cost performance, and economic outlook and turmoil.

Demographic Profile and Projections: Bay Area (9 counties)*  

  • Total population: 7.7 million (and will hit 8.4 million by 2025).
  • Working-age individuals (15 - 64 years old): 68 percent of total population in 2015 (and will fall to 64 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 4.2 million out of 5.9 million adult population.
  • Labor force participation rate (adults who “want” to work): 71 percent (or 4.2 million individuals).
  • Unemployment rate: 2.5 percent (versus 3.9 in CA and 3.6 in U.S.)
  • Unemployed workers: 102,300.
  • Median household income: $99,000 as of 2018 (compared to $68,000 for CA and $59,000 for U.S.)
  • Poverty rate: 9.1 percent (versus 14 in CA and 14 in U.S.)
  • Education of population: 45 percent have a college degree; 26 percent some college; 15 percent high school diploma; and 14 percent no high school diploma.
  • Employment sector growth: click the following links for local future growth breakdowns (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance — San Francisco-San Mateo-Redwood City region; Santa Clara-San Jose-Sunnyvale region; Oakland-Hayward-Berkeley region; Vallejo-Fairfield region; Napa County region; Sonoma County region; and Marin County region.
  • * Combined counties of San Francisco, San Mateo, Santa Clara, Alameda, Contra Costa, Solano, Napa, Sonoma, and Marin
  • ** Data as of May 2019 from the California Center for Jobs and the Economy; California Employment Development Department; California Department of Finance; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; and U.S. Census Burea

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