Job growth in the San Francisco and San Jose metro areas remains strong, driven by a robust high tech sector and a recovering housing market. On a year-to-year basis payroll employment in the San Francisco metro area was up 2.7 percent in October, well above the U.S. average of 1.5 percent. On an absolute basis, San Francisco payroll employment remains well below the late 2007 pre-recession peak, which in turn was well below the late 2000 peak. So recent gains are good, but the metro area remains some 200,000 payroll jobs shy of its all-time peak employment level set in late 2000. The smaller San Jose metro area shows a similar pattern. October payroll employment was up 3.5 percent from a year ago. However, San Jose payroll employment remains more than 4,000 jobs shy of its early 2008 peak. Both areas were north of the U.S. unemployment rate of 7.8 percent in September. San Francisco barely, at 8.0 percent. San Jose more so, at 8.4 percent.
Improving labor markets are helping state tax revenues. October revenues exceeded expectations, reducing the state’s budget gap to 2.1 percent, and putting a balanced budget within reach. However, California is very exposed to the federal budget’s “Fiscal Cliff,” which has the potential to derail state budget progress.
According to the latest Case-Shiller house price data, real estate markets in Northern California continue to strengthen. House prices for San Francisco were up 5.3 percent in August from a year earlier, above the Case-Shiller 20-City composite index, which gained 2.0 percent. Some of the gain in house price indexes in Northern California, and in many other regions, is due to a declining share of distressed properties for sale. However, it is safe to say that real estate fundamentals are tightening across the region. According to a recent study, San Jose has the lowest housing vacancy rate in the country at 4.3 percent for the year 2011.
Click here for the complete 2012Q4 Northern California Regional Economic Update: NorthernCA 2012Q4.