Workforce Partnership senior economist Daniel Enemark analyzes February’s labor market trends.
In February, San Diego experienced a significant decrease in unemployment, from a seasonally adjusted 4.4% in January down to 4.0% San Diego’s rate is well below the California rate (5.4%) and slightly above the US rate (3.8%).
The raw (not seasonally adjusted) numbers paint an even more impressive picture. Phil Blair, executive officer of Manpower West, viewed today’s news as cause for celebration. “San Diego County pulls itself out of the January unemployment rate of 4.7% to 4%. There is large job growth in the County’s core indicators of business services, education and health and the hospitality industry. All good signs for a robust spring and summer job market.”
We continue a comparatively quick recovery from the COVID-19 recession—the sharpest but shortest recession on record. Two years into the pandemic, our unemployment rate (4.0%) is still higher than the 3.2% of February 2020, but that was an extraordinarily low rate. And, the labor force has nearly grown to its pre-pandemic size of 1.6 million, but we are still 14,000 workers (1%) shy of that number.
Inflation and demand for labor should drive continued growth in wages
While our unemployment rate is higher, the demand for workers has increased dramatically compared to pre-pandemic levels. The Bureau of Labor Statistics doesn’t report total job openings by County, but at the national level job openings are 57% higher than they were at the beginning of 2020.
Historically there are almost always more unemployed people than there are job openings. The ratio of unemployed people to job openings in the US dipped below 1 for the first time in 2017, reaching a pre-pandemic low of 0.72 in October 2019. But that has ratio been below .70 every month since September 2021. In other words, even if every single unemployed person in the US were hired this month, more than 30% of current job openings would remain unfilled.
Meanwhile, in San Diego wage growth is not keeping up with inflation. The Bureau of Labor Statistics recently reported that wages in San Diego County grew 5.1% from September 2020 to 2021. In the same time frame, we experienced 6.5% price inflation, so our wages aren’t going as far as they did last year. In January the year-over inflation rate was even higher—a whopping 8.2%—and data from Zumper, ApartmentList and Zillow suggest that rents and home prices have increased by around 25%.
Between high inflation, extreme housing costs and the soaring demand for labor, employers should expect the price of labor in San Diego to continue to grow. Blair points out that this economy presents an opportunity for job seekers. “Job postings continue to far outnumber job applicants so we will continue to see an employees’ job market and a competition for talent that will result in higher wages.”