As Fed Chair Yellen Said: “Strongest Job Market in Nearly a Decade”

Executive Summary:

  • The most exciting data point in the latest jobs report from the California Employment Development Department shows that the state’s unemployment rate fell to 5.3 percent on a seasonally adjusted basis in November, which is the second time this year that it has reached the lowest point since June 2007. The main driver of falling jobless claims is the large gain in household employment, which jumped by 47,000, almost three times the increase in the state’s labor force of 15,300.
  • All Bay Area counties saw unemployment rate drops of 0.3 percent or more from last November, and the region’s unemployment rate now averages 3.7 percent.
  • In November, California created 13,600 new jobs, compared with the upwardly revised 34,400 jobs added in October. The monthly job increases during 2016 have averaged 30,000. Despite the lower monthly new jobs in November, the state maintained solid growth at 2.3 percent and continues to outpace the national rate.
  • The slowing pace of job growth is anticipated at this point in the economic cycle, with Bay Area unemployment rates below 4 percent throughout 2016.
  • Continued strength in another employment measure, the Quarterly Census of Employment and Wages, suggests that November’s numbers may later be upwardly revised.
  • In the San Francisco and San Jose metropolitan areas, the strongest relative annual growth in jobs occurred in the construction sector — about 8 and 10 percent, respectively — though construction accounts for a smaller share of overall jobs than other industries. The largest share of jobs is in the professional and business services sector, which posted strong gains of almost 4 percent in San Francisco and nearly 8 percent in San Jose.
  • The tight labor market has pushed wages across the country and especially in California, which has some of the highest-paying regions in the U.S. According to Wells Fargo’s analysis of the Employment Cost Index, Santa Clara, San Mateo, and San Francisco rank among the top five counties with the highest average weekly wages. Santa Clara ranks No. 1, with an average weekly wage of $2,252, almost double the national average of $1,263. Napa County saw the largest annual increase in average wages in California, with a gain of more than 6 percent.
  • A separate report released earlier this month showed that California’s gross domestic product grew at a 2.2 percent annual rate in the second quarter, which is a percentage point higher than the country as a whole. California contributes 14 percent to the U.S. economy, which is more than any other state in the nation, and accounted for about 27 percent of the GDP growth over the last year. California is also the only state that saw its contribution to the U.S. economy grow by 0.2 percentage points from a year ago.
  • The state’s technology sector is the main driver, along with the information and professional, scientific, and technical services industries. The information and professional, scientific, and technical services sectors accounted for about 30 percent of California’s growth in the second quarter and 38 percent over the past year. The real estate and rental and leasing sectors accounted for 35 percent of the second-quarter growth.

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include chief economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.

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