Bubble Sectors Account for Bulk of Job Losses

Submitted by Rich Toscano on August 1, 2010 - 7:24pm
In my analysis of the local job market I've long singled out what I referred to as the "housing bubble beneficiary sectors."  As the name implies, these industries enjoyed huge growth as a direct result of San Diego's housing bubble.  They were, in no particular order:
  • Construction, which grew enormously as a result of the scramble to build to homes.
  • Finance, a sector which includes real estate and which benefitted from vastly increased real estate and mortgage transactions.
  • Retail, which boomed as San Diego home owners cashed out their ever-growing home equity to finance spending sprees.
These industries flourished as the housing bubble inflated earlier in the decade, eventually becoming bloated well beyond what a normal, non-bubbly economy would call for.  I looked at this topic in a 2006 article in which I tried to relay how dependent San Diego's economy had become on the real estate bubble.  That things were out of balance was apparent in the rate at which the bubble sectors had grown during the decade to date: construction by 38 percent, finance and real estate by 18 percent, and retail by 10 percent.  For comparison, the rest of the economy had grown only 6 percent over that same period.  The housing bubble sectors accounted for 49 percent of all San Diego job growth during those first six years of the decade.

Predictably, the swollen bubble sectors deflated right along with the housing bubble itself.  And while much of economy suffered, the bubble sectors took the brunt of it.  In this article I will take a closer look at how much these three sectors contributed to the region's multi-year job loss trend in comparison to the rest of the region's industries.  Just for kicks, I am also going to break out the government sector because it accounts for a big chunk of local employment (19 percent as of June 2010) and, unlike the private sector, its ups and downs are not strongly affected by the business cycle.

continue reading at voiceofsandiego.org

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Submitted by CA renter on August 2, 2010 - 1:57am.

The graph which breaks down employment by sector probably answers your question in your previous post about why jobs decline in the summer. It looks like govt jobs decline pretty regularly, based on your chart, and I'd guess that would be related to schools.

I've been saying this for awhile, but think another severe leg down is coming which will be led by major cuts in public spending (including all govt outlays: govt employees, private sector contractors working for the govt, businesses that provide goods/services to the govt, business that rely on tax credits or public grants, and all that stimulus spending that will likely come to an end.). People have a tendency to underestimate the beneficial effects of government spending. It affects almost everyone directly or indirectly.

Submitted by savingforahouse on August 2, 2010 - 4:44am.

great article rich-

In a sort of tongue and cheek way, one could argue that the data presented supports the non-monetarists, non-quantitative easing discussions. Massive credit did not produce long-term permanent jobs, just a small (10 year) boost that is now gone. Just like the 787 billion since the bailout. Unfortunately, the people that were the beneficiaries of the boost (construction, professional service) are now going to be looking for work that can't comeback over meaningful time periods for families.

In a relatively no growth world, it is gonna be hard to be an average joe.

Submitted by moneymaker on August 2, 2010 - 8:49pm.

I think it's going to be hard for everyone but the super rich in the foreseeable future. That's why I'm always baffled when the market appears to be going up, like it did today. I did my part and bought a brand new motorcycle this last week. American design right here in Cali, but built by Yamaha.

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