Three straight months of regional losses add to statewide weakness
The Bay Area lost 5,200 jobs last month due to a weak labor market; worse, the nine-county region has seen job losses for three months in a row, according to a new report.
Regional job losses were led by the South Bay, East Bay, and San Francisco-San Mateo County, according to state labor officials on Friday. The Bay Area’s setbacks in September were caused by the loss of over 4,000 tech jobs.
“The Bay Area economy may have shifted from just treading water to a period of backsliding under the weight of higher for longer interest rates, slowing consumer and business demand, and weaker growth in Asia and around the world,” said Scott Anderson, BMO Capital Markets’ chief U.S. economist and managing director.
The worst September job losses occurred in the San Francisco-San Mateo metro area, where employers cut a net total of 4,100 jobs, according to the state Employment Development Department.
According to the state, the South Bay lost 1,800 jobs, while the East Bay lost 1,600. Seasonal volatility was factored into all of the figures.
California’s job-creation engine has come to a halt. The state added only 8,700 jobs in September, the fourth month in a row that the state added fewer than 10,000 jobs.
The statewide unemployment rate worsened in September, rising to 4.7% from 4.6% in August. The unemployment rate in California in September 2022 was only 4%.
This is just one example of how badly California’s job market has deteriorated as the year has progressed. California added 41,800 jobs per month on average in the first five months of 2023. However, over the last four months, that state has averaged a paltry 7,700 job gains per month – a staggering 81.6% drop in the monthly average.
According to the most recent estimates, the Bay Area lost jobs in July, August, and September as a result of revisions to previous preliminary job reports.
“The Bay Area economy, which has been gliding above other parts of the state since 2021, is now feeling the forces of rising interest rates, commercial real estate collapse, and high inflation,” said Michael Bernick, a former director of the EDD and an employment attorney with law firm Duane Morris.
Worryingly, the current trend indicates that job losses have been steadily worsening in recent months.
“With the revision of previous months and the new September job losses, the employment trend is now clearly downward for the region,” said Jeff Bellisario, executive director of the Bay Area Council Economic Institute.
According to the most recent government data, the Bay Area lost 700 jobs in July, 3,700 in August, and 5,200 in September.
Anderson cautioned that the Bay Area job market appears to have shifted from a gradual slowdown to a more dire situation. “The shift to outright net job losses and accelerating job declines in the South Bay, East Bay and San Francisco-San Mateo area in September paints a darker picture of the near-term economic outlook,” he said.
According to information on industry job trends provided to this news organization by Beacon Economics, the tech sector appears to be the main culprit in the Bay Area’s steadily deteriorating job market.
“The tech sector is in transition, right-sizing in some segments of their business, adding employment in lower-cost metro centers, and getting ready for lift-off around artificial intelligence,” said Russell Hancock, president of the San Jose-based think tank Joint Venture Silicon Valley. “We’re also cornering the market in electric vehicles, clean energy and biotech.”
According to a review of Beacon-provided job totals by this news organization, Bay Area tech companies shed 4,800 jobs in September. Beacon derived its figures from the EDD report and adjusted them for seasonal variations in the industry.
According to Beacon estimates, the tech industry performed well in the Bay Area’s three largest metro areas last month:
— The San Francisco-San Mateo region took the brunt of the damage, losing 3,200 tech jobs.
— The South Bay lost 1,700 technology jobs.
— The East Bay was the only bright spot in the Bay Area’s tech sector in September, with 500 new tech jobs added.
“This data shows a clear decline in tech jobs over the summer,” said Jeffrey Michael, executive director of the University of the Pacific’s Center for Business and Policy Research in Stockton.
According to Beacon Economics, the hotel, restaurant, and drinking establishment sector also fell in September, losing 2,500 jobs.
The San Francisco-San Mateo region lost 3,000 hotel and restaurant jobs, while the East Bay lost 800 in this sector of the leisure and hospitality industry. However, the South Bay added 600 hotel and restaurant jobs.
In September, retail was one of the few bright spots in the Bay Area job market. Retailers added 1,200 jobs in the Bay Area, with gains of 500 retail jobs in both the south Bay and the San Francisco-San Mateo region, according to the Beacon report. Last month, the East Bay lost 300 retail jobs.
“We can expect the job growth slowdown to continue, as the period of easy job growth, like the period of easy money, comes to an end,” said Bernick. “The layoffs in the tech sector are of the highest profile, but the fuller narrative is the job slowdown in nearly all of the other sectors.”
Some experts warn that the Bay Area may not recover quickly from the current wave of layoffs.
“A quick reversal of this trend appears unlikely with much of the tech sector slowing hiring plans, the service sector experiencing labor force constraints, and manufacturing and construction both facing headwinds from high interest rates,” Bellisario said in a statement.
According to Hancock, the current sour job market in the Bay Area is simply a feature of the region’s boom-bust-boom economy.
Venture capital funding remains strong in the Bay Area and Silicon Valley in particular, he said, and new tech, biotech, and other advanced technology startups continue to emerge.
“The Bay Area has always had ups and downs,” said Hancock. “It’s the cost of being an innovation economy.” But we’ve always been tough. Slowdowns do not always indicate that something is fundamentally wrong.”