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Bay Area job market “defies gravity” economists say

SAN FRANCISCO — The Bay Area job market will out-perform the nation during 2018, but skyrocketing housing prices might imperil the region’s economy, two economists predicted on Monday.
“The Bay Area is defying gravity,” Jerry Nickelsburg, director of the UCLA Anderson Forecast, said during a conference co-sponsored by the Anderson Forecast and UC Hastings College of the Law.
The job market in the Bay Area is expected to grow by about 2.1 percent during 2018, while the state should grow by 1.9 percent, and the U.S. economy should increase its total non-farm payroll jobs by around 1.6 percent, the Anderson forecasters predicted.
“The Bay Area is the most dynamic, most robust, metro area” in terms of its job market and economy, William Yu, a UCLA Anderson economist said during his presentation.
The employment upswing in the nine-county region has occurred at the same time that more and more regions in California are enjoying a boom.
“We are just growing like crazy in California,” Nickelsburg said. “California is at full employment.”
The U.S. economy also should grow strongly, the economists said.
One area of worry that could trigger an economic slowdown: the battered brick-and-mortar segments of the retail sector.
“We have too much investment in retail, we have too many retail jobs,” Nickelsburg warned.
Still, in the Bay Area, the extraordinary expansion of the technology sector will continue to underpin the region’s economy in a big way.
“High-tech companies are the main drivers of jobs, productivity and wage gains in the Bay Area,” Yu said.
Yu gave an example of the hiring of an employee by a tech giant in Silicon Valley that was akin to the economic multiplier that often has been assigned to manufacturing jobs.
“Let’s say Google hires a new employee,” Yu said. “That may be one additional job, but it’s not just that. This new employee with a relatively high wage will live in a good place, go to a good restaurant, go shopping, and buy services.”
Nevertheless, this tech-driven economy in the Bay Area carries plenty of risks.
“Tech jobs are much more volatile than non-tech jobs,” Yu said.
Yu reminded the audience that following the dot-com boom, tech jobs plummeted at a much steeper rate than jobs in the non-tech sector.
The expensive residential market was deemed to be perhaps the greatest peril for the region.
“High housing prices are a risk to the Bay Area economy,” Yu said. “It’s lucky that the the East Bay still provides affordable housing for people who work in Silicon Valley and San Francisco.”
Still, the outlook for the the Bay Area economy remains bright, despite the challenges.
“Bay Area job growth and personal income are expected to remain resilient in 2018, but will slow down in 2019 and 2020,” Yu said.

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