California’s economy is robust enough that the Golden State is nearly at full employment, according to a closely watched UCLA Anderson Forecast released Wednesday, and the Bay Area has already reached that sturdy level.
Despite both the Bay Area and the state being at or near those thresholds, the plateaus don’t necessarily signal that a downturn is lurking for the respective regions, economists said.
“The Bay Area is at full employment and has been there for a little time,” said Jerry Nickelsburg, senior economist with the Anderson Forecast.
Full employment doesn’t have a straightforward definition. Typically, it’s tied to a period of extremely low unemployment that’s comparable to other periods of low jobless rates, but it goes beyond that. Full employment occurs when everyone who wants a job can have one at the prevailing wage for a region.
“California was last at full employment in 2007,” Nickelsburg said.
The Bay Area’s three major urban centers — Santa Clara County, the East Bay and San Francisco-San Mateo — are removed by about a decade or more from the last occasions they achieved full employment, according to figures from Beacon Economics that were adjusted for seasonal variations.
Santa Clara County, over the six months that ended in April, averaged 3.9 percent for its unemployment rate. The last time the South Bay posted a better jobless rate was in April 2001, at the end of the dot-com boom, when wages were also strong and jobs were plentiful.
The East Bay has averaged 4.4 percent for its jobless rate during the last half-year. The last time it was at that benchmark was March 2007, which coincides with the previous year that California was at full employment, as estimated by Nickelsburg.
Over the last six months, the San Francisco-San Mateo area averaged 3.2 percent for its jobless rate. In December 2000, also during the dot-com period that brought numerous tech startups and soaring wages to that urban center, San Francisco-San Mateo posted a jobless rate of 3.1 percent, the Beacon figures show.
“These trends reflect the strength of the Bay Area relative to other regions,” said Mark Vitner, senior economist with San Francisco-based Wells Fargo Bank.
California job growth will remain fairly sturdy during 2016, the Anderson Forecast predicted. However, the pace of job growth is expected to fade over the next few years.
During 2016, total payroll jobs in California should grow at an annual rate of 2.4 percent, according to the forecast. But that pace should slow to 1.6 percent in 2017, and to 0.8 percent in 2018.
The Anderson Forecast also pointed to other indications of a slowing job market. California’s unemployment rate should average 5.2 percent in 2016, improve to 4.9 percent in 2017 and then worsen to 5.1 percent in 2018.
Personal income for California residents should average a 3.1 percent annual growth rate in 2016, 3.4 percent in 2017 and 3 percent in 2018, the forecast estimated.
Full employment, analysts believe, will help improve wage growth throughout the Bay Area and in California.
“You are going to see upward pressure in wages in the Bay Area,” Vitner said. “The Bay Area comes closer to meeting the definition of full employment than anywhere else in the country. This means we will have some of the nation’s strongest wage growth in the Bay Area.”
Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.
