Straight Talk
California Added Jobs at the Fastest Rate in the U.S. in 2017

From our company chief economist, Selma Hepp

  • Job reports for both California and the U.S. show strong growth so far in 2018.
  • According to data from the U.S. Bureau of Labor Statistics, America added 313,000 jobs in February, the strongest monthly gain since July 2016. Over the last three months, there were an average of 242,000 jobs added per month, and the annual total reached 2.281 million in February. Some experts warn that mild February weather could have helped boost employment and that the country’s labor market will see a pullback in March.
  • Job gains were broad-based across many sectors, including professional and business services, leisure and hospitality, trade and transportation, and education and health services. The construction industry added 61,000 positions, the biggest increase in nearly 11 years, and that sector has added 185,000 jobs over the past four months. The retail trade sector (up 50,000 jobs), the manufacturing industry, and schools and local governments also created jobs. Government jobs increased by 26,000 workers, also the strongest gain since July 2016.
  • Other parts of the latest U.S. jobs report suggest that labor-force participation is picking up again, with more than 800,000 people joining in February — the largest monthly increase since 1983. Consequently, the U.S. unemployment rate held steady at 4.1 percent, the lowest since late 2000. Further increases in labor-force participation will be key to maintaining strong job growth, as ongoing demographic changes suggest further shrinkage.
  • Unfortunately, wage growth disappointed in February, with only a four-cent gain, though a large share of lower-wage jobs added attributed to the anemic increase. On a positive note, the average hours worked increased. The lack of wage growth, however, may hold back the Federal Reserve’s decision to implement more aggressive rate hikes.
  • California’s job market also started 2018 on strong footing, following better than previously reported 2017 gains. According to the California Employment Development Department, the state added 35,500 jobs in January, bringing annual growth to 362,300 jobs. The annual benchmark revision, which usually happens in February, showed that California added 30,000 more jobs than previously stated in 2017 and led the nation for employment growth.
  • California’s annual benchmark suggests that more jobs were added in the health care, transportation, warehousing and utilities, and professional and business services sectors. Across state metropolitan areas, Orange County had the largest upward revision, followed by the San Jose metropolitan area, where 2017 job gains increased from 17,700 to 26,400.
  • California’s construction industry added the most jobs — 11,100 — in January, followed by trade, transportation, and utilities (up 10,800); and educational and health services (up 10,700). Over the last year, the largest job gains were in the educational and health services sector, up 95,700 jobs; construction, up 75,500 jobs; and leisure and hospitality, up 58,400 jobs.
  • With most of the jobs created falling into lower-wage sectors, California faces a significant conundrum going forward. The imbalance between wages and housing costs will keep a lid on future economic growth. While the issue has taken center stage among California policy makers, local employers are increasingly facing a lack of labor supply and an unwillingness of qualified workers to immigrate to the state due to high housing costs.
  • Regionally, California’s annual job growth was widespread. While seasonal factors led to a job decline between December and January, January’s year-over-year numbers show 21,700 jobs added in the San Francisco metro area (including San Mateo County). Most of the gain came from the professional and business services sector, followed by information. The San Jose metro area (including Santa Clara and San Benito counties), added 31,700 jobs over the year, with the information sector leading the expansion. Alameda and Contra Costa counties added 26,200 jobs, with the health care and social-assistance sectors posting the biggest gains, though a similar surge was seen in construction, where specialty trade contractors and heavy and civil-engineering construction led the increase. Sonoma County added 6,000 jobs on an annual basis, Napa County added 800 jobs, and Marin County added 2,900 jobs. Los Angeles County created 75,500 jobs over the year, with the education and health services sectors reporting the largest year-over-year increases, followed by health care and social-assistance services. Again, most of the jobs added were in lower-wage industries.
  • Lastly, according to the Conference Board Help Wanted OnLine data series, California employers added a total of 568,288 job advertisements in January 2018, which is a seasonally adjusted increase of 8,675 postings from the month before. California’s supply/demand rate was 1.5, which means there was more than one job available for each unemployed person in the state.

Selma Hepp is the Chief Economist and Vice President of Business Intelligence for Compass. 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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