Economists bemoan local job losses

8:21 p.m. April 18, 2008

For the first time in 15 years, San Diego County suffered a year-to-year decline in jobs last month, as the regional economy continued to feel the effects of the declining housing market.

Advertisement Between March 2007 and March 2008, local employers cut 1,700 jobs from their payrolls, according to data released Friday by the California Employment Development Department. Unemployment last month surged to 5.3 percent, up from 5.0 percent in February and 4.2 percent in March 2007.
Economists say the layoffs and the spike in unemployment raise the chances that the local economy may go into recession, but they continue to say it is not likely.

“This is obviously not a good situation,” said Alan Gin, economist at the University of San Diego. “I’ve been in the camp that’s said we’re not going to have an official recession, but this is moving us closer to that possibility. The question is whether (the job losses) will continue over the next couple months.”

Marney Cox, economist for the San Diego Association of Governments, or SANDAG, said the economy is “hanging right on the edge of recession,” although he still thinks San Diego can avoid it. Even so, he believes that California is headed into a recession – if it is not there already.

The state lost 12,000 jobs over the past year, driving unemployment to 6.2 percent last month, compared to 5.7 percent in February. That was the biggest monthly jump since 1976. A year ago, the state unemployment rate was just 5.0 percent.

California now has the third highest unemployment rate in the nation after Michigan, where unemployment has surged to 7.2 percent because of layoffs in the auto industry, and Alaska, which has a 6.7 jobless rate. Many of the recent job losses have been concentrated in Southern California, while San Francisco, San Mateo and Marin counties continue to add jobs.

On a monthly basis, San Diego County added 6,000 jobs between February and March. But most of those were seasonal jobs in leisure and hospitality related to spring break, as well as a seasonal bounce from January and February, which are typically two of the lowest employment months of the year.

When seasonal changes are taken out of the equation, the county has lost jobs steadily from December through February, with a tiny uptick of 600 jobs last month, said Christopher Thornberg, an economist at Beacon Economics in Los Angeles.

The year-to-year job losses were mainly concentrated in industries related to the troubled housing market, including 9,100 job cuts in construction and 5,700 in financial activities, such as real estate and mortgage brokerages.

In addition, 1,200 jobs were lost in manufacturing, which has long been in decline, and 900 jobs were lost in retail, which has been feeling the effects of the sagging economy.

Those job losses were offset by major gains in hospitals, schools, law offices, laboratories, bars and restaurants. But for the first time since the housing crisis began, the layoffs in the real estate market outweighed the hiring in other sectors.

“This is worse than we’ve been expecting,” said Erik Bruvold, who heads the San Diego Institute for Policy Research, a local political and economic think tank. “We have not expected to see year-over-year job declines. It really shows how much impact the decline in real estate has been having on the local economy.”

The weakness in employment has tracked the declining value of residential real estate. Since peaking in June 2006, San Diego County has lost 22,500 jobs related to construction, real estate and financing.

More recently, the losses have spread to retail. Economists tie the loss of retail jobs directly to the decline in home values. Homeowners are spending less money at home-improvement stores. And they are no longer using home equity lines of credit to finance big-ticket items.

SANDAG’s Cox noted that taxable retail sales in the county have dropped 2.2 percent since the current fiscal year began July 1, sliding from $37.1 billion in the first three quarters of fiscal 2007 to $36.3 billion in the same period of fiscal 2008.

“With that kind of drop, you would expect to see a decline in retail sales jobs,” he said.

Thornberg said the employment situation would be worse it it weren’t for a rise in tourism created by the low value of the dollar.

“More people are coming to the United States to take advantage of our low prices,” he said. “And more Americans are putting off their trips to Europe and deciding to go to SeaWorld or the Wild Animal Park instead.”

Murtaza Baxamusa, economist for the San Diego Center on Policy Initiatives, said that the growing dependence on tourism jobs means the employment situation in San Diego County is worse than the hiring figures imply.

“The mix of jobs available in San Diego region continues to shift toward low-paying, part-time jobs,” he said. “By contrast, our region continues to lose solid middle-class jobs in manufacturing, construction, transportation and utilities.”

A bright spot in employment has been state and local government, which added 2,500 jobs in the past year. But that hiring is likely to slow because of declines in sales and property taxes, coupled with declines in income taxes from laid-off workers and a rise in unemployment payouts.

Gov. Arnold Schwarzenegger is already threatening mass layoffs, and those threats may become reality as revenue shrinks.

“The disappearance of job growth and rise in unemployment means more bad news ahead for state and local budgets,” said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto.

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