Can the Employment Rate Get Any Better?

The unemployment rate in Los Angeles has hit record lows, according to a new report from JLL, but it may have bottomed out. “The unemployment rate is unlikely to move much lower, especially as more people enter the workforce and look for opportunities,” Amber Schiada of JLL, says about employment in Los Angeles. “The biggest challenge for employers who are looking to expand will be finding skilled workers. L.A. has one of the most diverse economies in the United States, and this bodes well for steady expansion without much volatility.”

According to the report, unemployment has reached 4% with leisure and hospitality, technology and construction industries adding the most jobs in the last 12 months. In the last decade, 33,000 jobs have been added to the office-using sector. “Steady economic expansion across multiple sectors is driving job growth in LA and pushing unemployment to lows we haven’t seen since the 1960s,” Schiada, senior director of research for the Southwest at JLL, tells GlobeSt.com. “A strong job market is bringing more people into the workforce, too, with nearly 5.2 million people either employed or looking for work, up from a recession low of just 4.8 million in 2009 when prospects were less attractive. The job market is robust for a variety of industries including media and entertainment, construction, healthcare, and traditional professional services and finance, too. With more than 4.9 million employed, we’re 7% above previous peak employment achieved in 2008.”

Media and technology industries have fueled a tremendous amount of job growth, growing by nearly 4% in the last 12 months alone. “Some of these jobs are highly skilled, and while not the greatest contributors to job growth on an absolute basis, they typically have a higher multiplier effect on a local economy,” explains Schiada. “Some economists argue that these jobs can create up to five additional jobs locally because of added demand for doctors, financial services professionals, legal professionals to protect IP, and other services such as fitness, childcare, and home services. The growth in new media is certainly a stronger economic driver than the job numbers in that sector alone would indicate.”

While tech and media have been a leader in job creation, the Los Angeles market is quite diverse in terms of industries. Job listings run the gamut, with listings for registered nurses, security guards, and software developers at the top of the list, according to Schiada. Jobs supporting the industrial market were also strong, with a need for warehousing and distribution workers and truck drivers. In fact, truck drivers topped the job listings with 1,937 job ads posted in L.A. Currently, job listings are at 115,000, which is down from the 2015 peak of 150,000, but not a threat to further expansion.

This job activity, of course, positively benefits the office market, and these numbers are reflected in occupancy gains and leasing activity this year. “Occupancy gains in the office sector are being driven by tech companies expanding their LA presence, as well as by new media companies super-charging their content creation strategies,” explains Schiada. “There is not a lot of new supply on the horizon, with only 2.6 million square feet under way. Lack of new supply in an already limited large-block market is especially challenging for larger companies looking to expand or consolidate operations. The challenge with low unemployment could make it difficult for companies to fill desks and grow as quickly as planned, since talent is in short supply.”

The job growth is also impacting the industrial market, which is struggling to find industrial workers. “Low unemployment indicates a shortage of labor and this presenting interesting challenges for industrial tenants, especially those looking to fill positions related to warehousing and distribution,” says Schiada. “Strong port activity and the explosive growth in ecommerce are both creating new opportunities for workers, but the labor shortage is top concern. Industrial tenants are increasingly asking about labor availability as part of the site selection process.”

While there are certainly side effects, overall, the low unemployment rate is an indicator of a healthy economy. “People are re-entering the workforce than ever before. And new grads are further supplying the local labor force,” says Schiada. “USC grads stay post-graduation 53% of the time, compared with 51.7% from Pepperdine, and 48.6% from UCLA.”