Factors Driving Employment Growth in SoCal

Ingham: “The major change in drivers over the last five years or so has been the tremendous growth of technology and healthcare companies that have replaced the jobs lost in the financial-services sector during the same timeframe.”

IRVINE, CA— Job growth has been strong in Southern California throughout the economic recovery. Charlie Smith , COO of L.A. brokerage for JLL , tells GlobeSt.com exclusively that the Los Angeles economy is “gaining headwind with unemployment dropping 2.5% over the last 12 months. L.A. healthcare, education, tourism and professional-services sectors have contributed the most to job growth. Los Angeles maintains one of the most diverse and dynamic economies in the country, and we expect continued growth through 2016.” We also spoke exclusively with JLL’s senior managing director in Orange County Jeff Ingham and managing director in San Diego Jay Alexander about what has led to this growth and how each market will sustain it. GlobeSt.com: What factors are driving employment growth in your area? Ingham: If you look through our recovery since 2010, Orange County has added more than 200,000 jobs, bringing unemployment down from 9.9% to 4% today. Our largest sector, professional and business services, had an increase of 22.4% during the same time period. Additionally, and as expected, the construction industry has seen significant increases over the past 12 to 24 months. The major change in drivers over the last five years or so has been the tremendous growth of technology and healthcare companies that have replaced the jobs lost in the financial-services sector during the same timeframe. In 2015, venture-capital funding in the local high-tech industry reached $608.9 million, up 93.9% from 2014. Alexander: San Diego’s employment growth has been broad based, with every major employment sector recording year-over-year gains in the latest employment release. More than 188,000 jobs have been created in San Diego County since the doldrums of the last recession , and the total number of employed is now 5.2% higher than the peak level reached in 2007. Technology companies have been a strong sector in San Diego, similar to their role in the national employment growth. Even companies that are not currently in a growth mode, such as Sony and Qualcomm , have seen divisions spin off and form or join other companies. PTC recently acquired Qualcomm’s augmented reality business, and Daybreak Game Co. split off from Sony last year. In addition to the local tech companies that are growing rapidly, such as ViaSat , San Diego is seeing a number of companies from other markets come into the county. FitBit recently established a San Diego office and subsequently expanded the office within months of opening. GoPro and Google also count themselves among the out-of-area companies that are finding San Diego an attractive market into which to grow. Of course, it’s not just technology—there are multiple industries that have done quite well in this cycle. Most all of the industries that have a strong presence in San Diego have been growing, from life sciences to craft beer, which has well more than doubled its local employment base in the past four years.

Alexander: “The Navy’s long-term focus on rebalancing to the Pacific will continue to bring in direct and indirect employment growth, with the additional sailors stationed here and the repairs and maintenance the ships will require.”

GlobeSt.com: How will your area sustain employment growth over the next 24 months? Ingham: Before the recession, the Orange County economy was largely dependent on the mortgage and financial-services sectors; however, the local economy continues to diversify, which bodes well for future growth. As referenced above, the bulk of this growth has come from healthcare and healthcare-related technology companies. The startup environment in OC is strong; with the support of local tech and biotech/life-science companies through OCTANE and the local investment community, the growing presence of incubators and collaborative workspaces is encouraging start-ups to open here and to establish their companies in the county. OC attracts both large and small companies. Companies such as Nellson Nutraceutical and United Sports Brands are bringing hundreds of new jobs to the market while we’re also experiencing entrepreneurial growth, which is drawing in Millennials. Alexander: Another one of the large employment sectors in San Diego are the defense contractors. There have been a number of announcements in that arena that bode well for employment growth over the next couple of years. It seems like every other week there is a new major shipbuilding or ship-repair contract being reported. The Navy ‘s long-term focus on rebalancing to the Pacific will continue to bring in direct and indirect employment growth, with the additional sailors stationed here and the repairs and maintenance the ships will require. BAE Systems is investing $100 million in improvements to their local facilities, which will include a new dry dock scheduled to open in 2017 that will increase their capabilities. On the aerospace side, a recent EDC report stated that San Diego aerospace employment has grown by 67% over the past decade, despite a net decline in aerospace employment for Southern California overall. One recent harbinger of forthcoming growth in this sector was General Atomics ‘ $40-million investment in a 275,000-square-foot building in Rancho Bernardo for additional expansion. GlobeSt.com: What challenges does your area face when it comes to sustaining employment growth? Ingham: While Orange County provides for a great place to live from a weather, commute and overall active-lifestyle standpoint, this quality of life comes at a significant cost as compared to other parts of the country. When the economy surges, so do housing costs, which can make it difficult for young adults and new families located in and around the office hubs of the county. Additionally, the area is “multi-centric,” lacking an urban/city feel like parts of L.A. and San Francisco—which, for many Millennials and creative thinkers, influences where they will consider living. This, coupled with the lack of quality public transportation, could hinder long-term growth. Alexander: With San Diego’s large military and defense-contractor presence, the threat of US budget sequestration looms as a damper to the local economy. The Bipartisan Budget Act of 2015 alleviated those concerns for the next two years, but the issue will circle back around in 2018. A lot can change in a couple years, and we will see how the government decides to move forward on the issue at that time. Additionally, we are keeping an eye on interest rates . If interest rates move higher, this could act as a drag on some segments in the local economy.