Can the Bay Area Continue National-Leading Job Growth?

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It probably comes as little surprise to most people who live in the Bay Area and Silicon Valley, but, according to a recent CoStar report, the unemployment rates in the three primary metro areas, including San Jose, have fallen to near critical levels. While low unemployment is typically a good thing, many local employers are finding it difficult to generate new job growth in the current labor conditions. The rate of job grown is slowing in San Jose, San Francisco, and East Bay, as employers find it increasingly difficult to find qualified workers in the tight labor environment.

Source: California Dept of Finance

The unemployment rates in San Francisco and San Jose both came in under 3% for the first quarter of 2019 (2.4% and 2.8%, respectively), with East Bay coming in at 3.4%. Unemployment has been declining for a decade, since 2009, due mostly to the explosive job growth in the tech sectors that underpin the local economies. This job growth has been a key driver for the demand in commercial real estate, as start ups and established companies compete for office space. The job growth in the Bay Area has outpaced most of the rest of the United States, beating the national average throughout the decade long period of expansion. Even with the pace of growth slowing, 2018 was still a strong year for the Bay area, with job growth in San Jose coming in at 2.0%, 1.7% in East Bay, and 3.8% in San Francisco.

Low unemployment in the Bay area has had positive effects on real estate market. San Francisco is currently ranked #1 in the country for average rental rates for both office space and multi-family units. San Jose and East Bay both ranked in the Top 10. Sales prices, not unexpectedly, are also among the strongest in the nation.

Sustaining the massive job growth requires a growing population of qualified, employable workers. The number of people moving into the Bay Area must exceed the number of people moving out (also termed ” positive net migration”). Net domestic migration (movement within the same country) has actually turned negative for the San Francisco and San Jose (since 2013/2014), and East Bay (since 2015/2016), with more people moving out than moving in. This means foreign immigration has become a necessary component to generating positive net migration and sustained job growth, according to the California Department of Finance.

While the demographic challenges are worthy of note, the overall near-term outlook for the three regions of the Bay Area continue to be positive. In economic forecast modeling published by CoStar, sustained job growth will continue at the national level, but will continue to slow. The Bay area is expected to follow suit, outpacing the national forecasts slightly, but reflecting positive yet softening employment growth.

As long as net migration remains positive, either through immigration or a reversal of domestic migration trends, the long-standing economic expansion in the Bay Area should continue to generate strong demand for commercial and residential real estate for the near term. Obviously, we’ll be watching closely the developments surrounding immigration at the national level, as any drastic changes could impact the Bay Area’s ability to fulfill demand for qualified workers.

Let my team at Keystone Realtors® meet all your real estate needs. We can help you find the perfect investment property to get started, and provide advice on your investing journey. Paul Phangureh has over 16 years of experience in buying and selling in the Santa Clara and San Mateo County areas, specializing in the high-end, luxury market, as well as commercial and multi-use real estate. We can help you navigate the process of getting started with real estate investment. Visit our website at for listings and information. You can contact Paul at 650-924-2544, or email at [email protected].