Northern California Growth Eased in 2013H1

The Northern California economy remains vibrant, fueled by Silicon Valley and rapidly tightening real estate markets. However, payroll employment growth cooled in in the first half of 2013.  Year-over-year payroll job growth was very strong at 3.6 percent in 2012Q4. By 2013Q2 job growth had cooled to 2.4 percent, still well above the national average of 1.6 percent. At 6.5 percent for 2013Q2, the area’s unemployment rate was well below the national average of 7.6 percent for the quarter.  Both the San Francisco and San Jose metropolitan areas showed essentially no payroll job gains from May through July of this year.    

Residential real estate markets continue to tighten. House prices in San Francisco are among the fastest growing in the country, up 24.5 percent, more than double the Case-Shiller 20-City composite average of 12.1 percent as of June. Price levels remain below the early 2006 peak but the repair to date has significantly increased homeowner equity. The positive wealth effect from homeowner equity gains and financial market improvement is a strong support to area retailers. House construction activity is strong. Total housing starts were up 39 percent in 2013Q2 over the previous year. However, construction companies report a shortage of available labor and that may be a limiting factor in new construction over the next year.

Silicon Valley’s hiring spree is cooling, but technology companies continue to generate enormous wealth for the area. Mountain View-based LinkedIn plans to raise $1.2 billion in a secondary offering, more than doubling their net cash position. Facebook stock has recovered from its IPO stumble. Cisco has recently acquired Meraki, a cloud networking software and hardware company, and has increased its footprint in San Francisco. However, the company has announced system-wide layoffs of 4,000.

Northern California 2013Q2 Click here for the complete Northern California Regional Economic Update: NorthernCA 2013Q2

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