Southern California labor markets continue to underperform the national average, yet they are making headway to recovering from the greatest recession since the Great Depression. Payroll employment grew at 1.6 percent from a year ago in October, remaining below the national average of 1.7 percent. The spark of improving labor markets can be seen in the labor force data. After a three-quarter contraction beginning 2012Q1, the labor force has consistently expanded for the past four quarters ending 2013Q3.
In September, California lawmakers approved a minimum wage bill which will have opposing effects on the near- term economy. Assembly Bill 10 will increase the minimum wage incrementally from its current minimum wage of $8/hour to $10/hour by January 2016. As the minimum wage increases over the next two years, expectations are that retail consumer spending will receive a boost while the wage increases will be a drag on California payroll employment numbers.
Housing markets continue to improve. Housing starts for the region and across most of the nation dipped in 2013Q2, yet are expected to trend upward as the overall economy advances next year. Demand for single-family homes continues to stay ahead of supply, helping to drive up home values. Home prices saw their highest year- over-year gains since 2006Q2, growing 14.4 percent in 2013Q3.
California continues to invest in long-term projects to better position its future economic growth. It began construction on its long-awaited and controversial high speed rail system. The project, estimated to cost over $68 billion, would connect San Francisco with Los Angeles. The California High-Speed Rail Authority completed a construction contract in August, yet suffered a legal setback in late November when a request for the sale of over $8 billion in state bonds to help fund the project was blocked. The authority plans to refile the request for the bond package and is set to move forward with the project, breaking ground in the near future.
Click here for the complete Southern California Regional Economic Update: SouthernCA 2013Q3.