State job market rebound will outpace rest of U.S.
California's job market should outpace the nation’s employment performance during the year 2021.
California’s job market should outpace the nation’s employment performance during 2021 — but remains two years away from climbing back to the record job totals the state reached in early 2020, a closely watched forecast predicted Wednesday.
Separately, the respected UCLA Anderson Forecast, in a long section of its quarterly report, cast doubts on the existence of a widespread exodus from the Bay Area.
As for the overall job market, the statewide employment sector, measured by the total number of nonfarm payroll jobs, should grow at double the pace of the United States job market, the economists with the Anderson Forecast predicted.
“Although the timing may be offset with California beginning a significant recovery later than some other states, we expect the California recovery to ultimately be, once again, faster than the U.S.,” economist Jerry Nickelsburg, the director of the Anderson Forecast, wrote in the quarterly report.
Non-farm payrolls in California, a broad measure of the job market, should grow 4.1% during 2021, according to the forecast, which was jointly prepared by Nickelsburg and Leila Bengali, an economist with the Anderson Forecast.
The predicted California job growth for 2021 would be nearly double the 2.1% expansion pace anticipated for payroll jobs in the United States, according to the report.
Despite the hopeful outlook, it will take at least until 2023 for California to recapture the record-setting heights for jobs that it had achieved in February 2020, the final month before state and local government agencies began to lock down businesses in a quest to combat the spread of the coronavirus.
The Anderson Forecast also turned a skeptical eye towards reports of a wideranging exodus from the
Bay Area.
The forecasters believe that most departures might be temporary and due primarily to short-term dislocations associated with the COVID-19 outbreak. They are unconvinced that any exodus has resulted from a structural long-term response to the sky-high taxes and exorbitant cost of living in the Bay Area and California generally.
The UCLA Anderson economists compared the current coronavirus-linked downturn to the effects of the dot-com meltdown and recession that actually did produce an exodus from the Bay Area.
“The important message from the data is that it does not unequivocally support a mass exodus from the Bay Area,” Nickelsburg wrote in the report. “On the contrary, it is consistent with a pandemic recession.”
To be sure, some economic benchmarks in 2020 paralleled the effects of the dot-com meltdown, such as huge job losses, rising unemployment, and plunging rents for apartments.
Nickelsburg, though, points to a major difference. Bay Area home prices nosedived in 2001, but rose throughout 2020 and so far in 2021.
“Housing prices have increased rather than decreased,” Nickelsburg wrote in the report. “There seems to be something very different here. It does not take too many scratches of the head to realize that what is different is the pandemic.”
Another gigantic contrast between what’s happening now and what occurred in 2001: The tech sector due to the dot-com bust. Things are markedly different this time for tech companies.
“Tech has not been in freefall,” Nickelsburg stated. “Indeed, tech’s profitability has grown. And while renters are pulling back on demand, higher-income homeowners are not.”
When universities and colleges reopen for in-person classes, students may well return in big numbers to locations such as San Jose, Berkeley, Palo Alto, and Santa Clara, Anderson Forecast researchers said.
“What about tech workers? The fact that home prices did not matter is strongly suggestive that the tech jobs have not left,” Nickesburg stated.
Lower-paid tech workers found alternatives to paying for high-cost residences near their places of employment. Some restaurant and retail workers may be taking advantage of renter protections and are staying put, according to Nickelsburg.
“Higher-income Bay Area residents, including and importantly those in the tech industries, are not engaging in a mass exodus, which means their enterprises are not as well,” Nickelsburg wrote.
The Anderson Forecast conceded that it’s too soon to tell whether an exodus is underway or if the reports of a headlong flight from the Bay Area are overdone.
The researchers primarily seek to point out that stark differences exist between the downturns of 2001 and 2020, including the still-high home prices and the tech sector’s health this time around.
“Could a mass exodus occur in the future? Of course, there is always that possibility,” Nickelsburg stated. “But we find no statistical indication of a 2001 déjà vu happening today.”
The researchers warned that some sectors will lag badly while others will bounce back more quickly.
“The leisure and hospitality sector will be the last to recover due to the depth of the decline in this sector and its reliance on international tourism,” the Anderson Forecast stated.
The tech sector will be in much better shape, however, which bodes well for Silicon Valley.
“The recovery will be earlier in business, scientific and technical services and in the information sector due to the demand for new technologies for the new way we are working and socializing,” the economists predicted.