While the unemployment rate in San Francisco dropped to 2.9 percent last month, the lowest unemployment rate since the dot-com boom when it hit 2.4 percent, the drop from 3.1 percent in April was driven by a reduction in the labor force (-2,700) and employment in the city actually dropped by 1,200 as well.
In fact, the number of people now living in San Francisco with a job (533,900) has dropped by 2,500 since the end of 2015, versus gaining 6,900 from the end of 2014 to the same time last year.
That being said, there are still 68,400 more people living in San Francisco with paychecks than there were at the end of 2000 and 7,300 more over the past year, an increase of 97,200 since January 2010.
At the same time, employment in Alameda County, which includes Oakland, has increased by over 100,000 since January 2010 and ticked up in May.
Congrats on a new way to put a negative spin on incredibly good economic news.
We’re guessing it’s our fact-based explanation of what’s actually going on that you’re characterizing as “negative spin,” which is par for your course, but is it the fact that employment in San Francisco is dropping, or the reduction in the local labor force, that you’re characterizing as “incredibly good economic news?”
It’s not “employment in San Francisco”, it’s employment of San Franciscans, no? The number of San Franciscans is topped out by the lack of housing.
The nomenclatural shortcomings have been pointed out before. there are, I believe 2 separate job surveys – IIRC the EDD does the one that asks where people work – but it’s likely the two move in tandem…and aren’t the number of jobs in SF also topped out, at least in the short term, by constraints on work space?
Keep in mind that demand for office space in San Francisco has started to decline and the vacancy rate is climbing.
(1) The headline says “Employment Drops”. The statistics show that “Unemployment Drops”. That’s a different thing.
(2) What Jake said below. This is trivial statistical noise
(3) Unemployment is 2.9%. That’s ludicrously good. I thought the generally accepted minimum unemployment rate was like 4% or something. We’re at 2.9% and dropping. Dropping!
2.9% is excellent, but you’re looking at position, not velocity.
Or if you prefer a sports analogy, you’re looking at where the puck is.
(1) The headline says “Employment Drops,” because it did. In addition, the unemployment rate dropped as well. But as explained above, the unemployment rate didn’t drop on account of an increase in employment.
(2) The magnitude of the month-to-month changes are arguably noise, but the cumulative trend is not.
(3) An unemployment rate of 2.9% is ludicrously good, but the reason for the recent dropping is not. And while the concept of “full employment” suggests a floor on the unemployment rate, as you need people looking for jobs in order to maintain the workforce or grow, that’s not the same thing as setting a ceiling on potential employment and growth.
There seems to be a trend here, but it will take several more monthly readings to validate that.
The office space net absorption started falling in the last quarter of 2015 or so and has dropped sharply since. That is worrisome for SF jobs if it continues. Is there much sub-leasing going on? That number would be interesting to see. Was it LinkedIn that sub-let some of the space in its new building? Seems I recall something like that. Or maybe it was the Zuniga building being half-empty with space available for sub-lease.
As with housing prices, there are signs here and there that things may have peaked for the current cycle.
May: 2.9%
April: 3.1%
March: 3.3%
Feb: 3.3%
Jan: 3.3%
Which cumulative trend should we be looking for, again?
Perhaps the cumulative month-over-month change and trend in actual employment and the labor force?
Jan: Employment -2,700; Labor Force -2,800
Feb: +1,800; +1,500
March: -100; +200
April: -300; -1,200
May: -1,200; -2,700
Cumulative change: Employment -2,500; Labor Force -5,000
Net change over the same five months in 2015: Employment +6,100; Labor Force +5,600
Looks a lot to me like a plateau with noise
But I recognize that you can’t persuade someone who’s decided on a narrative already
No kidding. And there’s no reason to let a basic understanding of the underlying data get in your way.
That being said, a relative plateau in employment is entirely possible. But in and of itself, a plateau would still represent a significant change in the trend, has real implications, and doesn’t change the fact that employment has dropped since the end of last year.
Exactly. A plateau in employment has lots of ramifications. Some good actually. Pressure taken off rents a bit, traffic if not getting better at least not getting worse.
At this point whether this is a plateau or the beginning of a decline no one knows. But scoffing at the possibility of a decline when SF had a 4 1/2 year employment decline in the early 2000s is failing to look at history and take history into account.
This data shows a plateau. The city is at a remarkably healthy place. I doubt it unemployment will drop further, but then again I didn’t think it would drop last month either because we are so close to minimum unemployment. I’m happy to be wrong.
There is no doubt that at some point unemployment will rise, but there’s no evidence of that yet.
How much housing stock has been added since 2000 and since 2015?
Are these people who just gave up looking for a job? And with regards to employment, are companies cutting back on hiring.
Is there any granularity to these numbers? Are the job loses in tech, service or some other sector. Or finance – Schwab is vacating the City and moving thousands out of state. I think most of the Schwab job loses have already happened.
The numbers are small still but the trend for 6 months now has been a steady loss of jobs in SF while the East Bay has mostly experienced gains during that time period.
The question is, do these changes signal a long term decline in SF employment as was seen last between 2001 and 2007? If so, how will that impact the thousands of housing units in the pipeline and the planned millions of square feet of approved but yet to break ground office space.
Once again (see comments by Signor Rossi and myself, above): these are the number of people who LIVE in SF who have jobs, NOT the number of jobs in SF.
I prefer Don Rossi
I’m sure i’ll get a snarky response to this, but are the writers on this site aware of their incredibly negative tone on practically all articles published?
An important point of clarification and fact: These statistics do NOT report employment in San Francisco. It reports the number of employed residents, which has nothing to do with the number of jobs in the City. Employed residents are simply that — people with jobs (anywhere) who live in SF. The numbers of jobs in the City (while I’m sure there is a chart that can show these are correlated to some extent), is independent, as jobs in the City are held by employed residents of this and other cities. The number of jobs in the City is around 650,000, not 550,000 as shown above. If you counted self-employed people, that number is well above 700,000 jobs in the City. The data above are essentially mirror images of each other — if you take the number of employed residents and divide by the labor force (which is a subset of the city’s population), you get the employment rate, the inverse of which is the unemployment rate. But neither of these numbers can tell you how many jobs are in the City. In fact, the number of employed residents and labor force could drop while the number of jobs in the city (ie total employment) rises. Please start reporting this accurately.
Or as accurately and consistently reported above, month in and month out, “the number of people now living in San Francisco with a job,” which is what matters when it comes to real estate as it drives demand.
And just as consistently and inaccurately – or at least misleadingly – headlined, month in and month out, despite critcism: “Employment IN San Francisco”
🙂
That’s correct, it’s employment, not the number of jobs, IN San Francisco.
No, that’s not correct. Read your own headline. Listen, I’m in the business of reporting things like this. When people read “employment in San Francisco” they rightfully think “employment that is occurring in San Francisco,” ie jobs in SF. Your reported data is of employed residents in San Francisco, which again, has nothing to do with “employment” occurring in SF. Employment and employed residents are apples and oranges. The data you are reporting does not in anyway show that employment in San Francisco dropped — it doesn’t even report employment in SF. The number of employed residents dropped. The amount of employment in SF is wholly independent of that.
The TLDR version is: How would you interpret the headline “Unemployment in SF”? The number of people in SF who are unemployed. Hence “Employment in SF” is the number of people in SF who are employed.
The full version is that as far as labor stats are concerned, people are in one of three categories:
Employed — Have a job
Unemployed — Have no job, but are looking for a job
Out of Labor Force — Have no job and are not looking.
Being in either of the top two categories counts as being in the ‘labor force’
This does lead to confusion since many people (such as SFRealist below) just assume that all those with no job are Unemployed and conversely that reduction in the unemployment rate indicated that the previously unemployed have found jobs. This is incorrect as people can either transition from unemployment to employment *or* they can stop looking for a job and thus drop out of the labor force.
That’s why a reduction in the unemployment rate due to a drop in the labor force is bad news vs a reduction in the unemployment rate due to increased employment being good news.
The unemployment rate being the ratio of the unemployed over the labor force, not the entire population.
the UE rate is always going to be low because nobody can afford to live here if they are unemployed,
Not true. Plenty of long term renters under RC living on the cheap (sublets subsidizes living expenses), the homeless, non profits with living accommodations, SRO’s. On the wealthy side trust funders, people living off investments, and other independently wealthy that like to live and play in SF. Between these two extremes, when I walk around mid day it seems to me that half this city is “unemployed.”
trustfunders and the like are not counted as unemployed. To be unemployed (officially) you need to be actively looking for a job. And, yes, there have always been a lot of people in San Francisco who have a lot of time on their hands and no obvious source of employment. But that’s another issue.
yeap, these people are not considered to be part of the “labor force”. the way UE is defined, there’s a built-in mechanism that keeps the official rate low no matter how bad the economy.
Is there any evidence that the trends for jobs and employment are diverging?
i.e. People are getting hung up on the phrasing that the editor uses to refer to employment in SF vs jobs in SF, but are the two metrics actually going in different directions?
Good point.
Its interesting that the net absorption of office space in SF has dropped from a little over 400K/quarter a year ago to 100K/quarter now. Based on the SS chart. That’s a pretty steep drop and may speak in part to the overall jobs situation in SF.
I think the claim came from Dave – at least implicitly – when he made this comment:
“The numbers are small still but the trend for 6 months now has been a steady loss of jobs in SF while the East Bay has mostly experienced gains during that time period”
Notwithstanding the fact that this doesn’t seem to be generally true, the inference was that jobs were moving from SF > Eastbay, hence “employment in SF” (the number of jobs in SF) could decline while “employment in SF (as in the number of San Franciscans with jobs) could be stable (or declining slightly). But of course, that thinking requires the definitions to be the opposite of those actually used.
I believe my other half is one of these 1200, but that’s what happens when you get a cancer diagnosis and go out on disability while you get therapy. he could have his job back, or another, tomorrow if his health and our new treatment schedule permitted. i may contribute as well as i cut back on my work to go to appointments.
my anecdotal story is meant to illustrate what happens as a city ages; and our city is aging, no? we’re still residents and we’ve cut back on labor. we know of both a gay couple and a lesbian couple that have sold off for early retirement elsewhere (4 more employed residents lost?). so we’re 0.5% of this number? i’m not sure what our “leaving the labor force” means (and we plan on returning).
now if healthy 20 somethings are leaving the labor force and the city, that’s bad. but if its travelers and campers that have packed their tents from golden gate park, not so bad. if retirees are retiring or if people have decided to cash out and breath, good/bad/who knows?
this data seems like tea leaves and i’m not sure that defining this as bad or good is of value without a lot more digging, especially when unemployment is so low regionally.
I don’t think cutting back or going on disability would count as being unemployed. Same if either of you quit. You’d be unemployed if you quit and then later started looking for work once your partner got healthy again.
Best of luck.
Here is my take on this numbers:
Large, non-tech employers like Schwab or Union Bank take 2-3 years to adjust their work force planning to a rise in office rents in the City. Now we’re starting to feel the shift of jobs in finance/insurance/health care out of the city center as a result to office rents in 2013, not 2016. Companies that want to stay in the Bay Area are moving to Oakland where public transportation is good and rents are lower than in the city. Overall, it might be beneficial from a traffic perspective as it creates more reverse commuters between Oakland and the City center.
An employer moving jobs from SF to Oakland would not directly account for a reduction in SF residents having a job. Theoretically if employed residents followed their job to it’s new location in Oakland and their housing unit either sat vacant or was filled with an unemployed person, that could reduced the number of SF residents with a job. But this seems unlikely to happen on a large scale.
I agree with you anon. I believe it has a slow but steady impact. If the employer moves from SF to Oakland, some SF residents will quit or retire early to avoid the commute. These position will be more attractive for people living in the East Bay, so more will apply. Slowly, you will see a shift in the work force from living in the city to living in the east bay. We can just guess if this trend is already reflected in these numbers.
These small employment fluctuations are little more than noise that are being amplifying by comments without regard for the actual stats. Look at a multi-month baseline and you can see the trend has been clear for a year or so: SF and much of the Bay Area are near full employment, can’t drive unemployment much below 3%. It is very common for the unemployment rate to fluctuate a few tenths percent a month, even as it moves by 1% or more over a year. Take a look at the monthly data for SF going back through the past 3 recessions to the early 1990s (namelink). In all that time SF has only once sustained an unemployment rate below 3% for even three months, at the dotcom peak of 1999Q4. Therefore, party like it is 1999 because we may not see this again for a long time.
FWIW, ~30k people/year move into SF from neighboring bay area counties and ~30k people/year move from SF to neighboring bay area counties. Year after year after year. And another 60-80k+ people move between SF and outside the bay area each year. In years when the local economy is strong the flow can be 40k+ in to SF and 30k out. Doesn’t take much imbalance in the numbers of all these people changing residences with or without jobs to perturb these numbers.
FTR, there has not been a “steady loss of jobs in SF.” Not just not true, not even truthy.
Cost of transportation in SF keeps going up. Not just the out-of-pocket cash outlay – but also the amount of time you have to spend getting anywhere. If you live in the East side of SF it is faster to go to Oakland at non peak times to shop than it is to go the West side of SF at anytime…
Why all the angst over these numbers? We’re at the end of a 4-7 year business cycle, unicorns are getting marked down, layoffs at tech companies are increasing in silicon valley, growth is anemic across the US and downright recessionary in other parts of the world. We’re due for a correction – its nature taking its course.
These numbers are what they are. They dont say the sky is falling, and they dont say that the SF economy is still booming. Its basically flat. It makes perfect sense when looking at the flattening of both residential rents and for sale product which have been substantiated by different data sets, many of which have been reported here with Socketsite. All you wannabe academics, get over yourselves.
2.9% is booming by almost everyones definition. We may be flattening, not yet confirmed, but we are undoubtedly still booming
I disagree. Booming implies expansion. We are not expanding.
No question this run-up has peaked. This latest cycle is running on fumes… but over the long term (5+ years) I still believe in SF and the prime neighborhoods in the Peninsula. A little froth at the margins of the economy does not negate tremendously strong fundamentals and more importantly, a culture of re-invention that runs on a 10-year cycle and has delivered world-changing win after win ie Intel -> Apple -> Microsoft -> Cisco -> Netscape -> Google -> Facebook -> whatever’s next (yet to be invented). The next big one is out there, you just have to believe.
I agree long term that there’s a good chance of a “next big thing” happening in the bay area. But there has also been an anomalous amount of exuberance in the housing sector beyond normal tech cycles.
Look at this interactive graph of home prices, particularly the ‘price to income’ tab. Both the last housing bubble and this current run up show a markedly higher ratio than most other cities and even for SF prior the the 1st bubble.
And this is ‘price to income’ ratio so this is showing increases in housing prices beyond simply what you’d infer from rising incomes.
That is key. SF is near historic unaffordable levels. UCSF and Google planning to build housing to attract employees is not a good sign. Hi-tech employees being priced out of the market is not a good sign.
agreed but you’d also have to consider the interest rate in the periods of hh income to price ratio. its so low now that that ratio is less of a factor in terms of monthly payments
‘Price to income’ ratio could possibly become meaningless in a region where home buyers are armed with substantial down payments (stock, cashing out the gain from prior house, etc.). Certainly, the low interest rate environment is another factor. Would be great to get another ratio: Mortgage principal to income ratio.
dont forget Genentech and Gilead, the top 2 biotech companies in the world
How could I forget those two … Gilead is going to bulldoze my office park any day now. But they are a great success story nonetheless. Point being, there are dozens of epic successes created here and there will be more. As a result, incomes will be high, housing will always be scarce and even if this run-up takes a breather for a few years, the market will be back.