County Unemployment Rate Falls to 2.9%

The unemployment rate in San Diego to 2.9% in April, the lowest rate since 1999 and the lowest rate ever for the month of April, according to research from The California Employment Development Department. In North County and Central County, the unemployment rate is even lower, at 2.7% and 2.8% respectively. During the month, the rate of job growth was 2.2%, outpacing the national average of 1.6%, and job growth for office-using employers was up 3.7%. Plus, unemployment rate claims fell nearly 25% year over year in April. We sat down with Michael Combs, research manager at CBRE, to talk about the job growth in San Diego County and how it is impacting the office market.

GlobeSt.com: Which industries are driving job growth in San Diego, and why?

Michael Combs: Tech, life sciences, aerospace/defense, construction and health care have been driving the job growth in the region, due to macro market conditions and expanded demand for these products and services. Tech and life science companies have been receiving historic volumes of investment, as existing companies grow and new companies form in San Diego. National and global contracts for defense and aerospace products are pouring into the region and the large companies in San Diego continue to grow their employee base to keep up with growing demand. The construction industry, especially new building contractors have been adding thousands of jobs per year to keep up with demand for new real estate supply, most notably in the multifamily sector. Finally, an aging population and expansion of health care coverage has been driving the demand for health care services, both nationally and locally.

GlobeSt.com: How has the low unemployment rate impacted the office market in San Diego?

Combs: Job growth is the primary driver of office space demand in any market, but continued growth depends on finding the right people to actually fill the jobs. Job growth has continued at a decent pace despite the limited supply of labor, but the region’s employers are going to have to continue and possibly even accelerate their ability to attract the talent in order to sustain growth. San Diego is an attractive market for business, but office demand in particular depends on growth in desks and bodies, compared to other property types that can scale physically with technology, automation or other efficiencies that don’t require a large increase in labor. As a result, office occupiers who are battling for the top talent are demanding improved spaces with luxury amenities in desirable locations, driving owners and developers to respond to these demands with major renovations and tenant improvements.

GlobeSt.com: What does this low of an unemployment rate–near full employment–say about the local economy in San Diego?

Combs: With the unemployment rate below 3.0%, the talent pool is low and shrinking, which will put some restraints on job growth. There are really only two ways to increase the supply of labor in a market: attract people from outside the market or convince people who are already in the market but outside of the labor force to come back to work. Talent attractions has many factors at play, but San Diego has proven to be an attractive market for skilled labor migration. Building the labor force from within requires training and education to build alignment with job requirements, as well as the right market conditions to attract more people back to the workforce. This will be a challenge given the skill level required for the types of jobs in growing industries like construction, tech and health care, but the region should be able to attract the workforce with right mix of market conditions and proactive training and education programs.

GlobeSt.com: What is your outlook for job gains for the remainder of 2018?

Combs: Capital investment, government contracts, residential demand and other factors should continue to drive demand and job growth in the region, but the big question is if San Diego employers will be able to find the right people for those jobs. This will be most challenging for employers with openings that rely on specialized education, experience or training. It also requires employers in the region to keep up with employers in other tight markets who are squeezed for talent. This means wages will likely have to grow, as well as investment in workplace amenities and other benefits that attract and retain talented people.