The Commerce Department reported last week that U.S. job growth faltered somewhat, with the country adding just 142,000 jobs overall, versus the consensus estimate of 228,000. Although the six-month trend of 200,000+ new jobs per month was broken, the jobs picture looks encouraging, especially on a local level, for the longer term.
The U.S. economy had been adding more than 200,000 jobs each month since December 2013 — the best streak of jobs growth since 2006 — until the most recent jobs report this past week. Employment gains for the previous two months were lowered by a total of 28,000 jobs as well.
Still, the unemployment rate ticked down to 6.1 percent, which is a six-year low and is very close to “full” employment — the Fed’s target of 5.5 percent unemployment or lower.
After opening lower, stocks rebounded to drive the Standard & Poor’s 500 to a new, all-time high close of 2008. Investors either believed this jobs report was an anomaly, or they believed that weaker jobs growth will relieve some of the pressure the Fed is feeling to start raising short-term interest rates sooner rather than later.
Not everything in the report was positive, however. The labor participation rate dipped to a 36-year low, to 62.8 percent in August from 62.9 percent in July. The drop from its 2000 peak of 67.3 percent can be explained by a number of factors, but the most significant is the aging of the workforce, baby boomers in particular. This is offset somewhat by a rising participation rate by those 55 and older due to increasing lifespans.
There has also been a long-term shift away from youth employment due to greater competition for lower-skilled jobs traditionally held by teenagers and young adults.
One bright spot in the August report was that labor participation by those between the ages of 25 and 54 improved to 81.1 percent from 80.8 percent in July, although this statistic is still down from 83 percent in 2008.
Shifting to our local economy, Santa Barbara County has shown significantly better jobs growth than the state of California and the country as a whole. With a labor force of about 223,000 in Santa Barbara County, our most recent data shows an unemployment rate of 6 percent for July. While this is comparable to the 6.1 percent for the country, leading into July, the county’s jobs picture looked significantly better, with June’s reading at only 5.4 percent and May’s at just 5 percent.
One could read this data series as a negative trend, we must note that with local employment data we have more volatility month to month, so we should expect the numbers to jump around a bit more than the national numbers. February’s reading was 7.2 percent, so if we move back in time a bit we can see significant improvement.
By contrast, California’s unemployment rate was 7.4 percent at the beginning of July, so Santa Barbara is faring considerably better than the state overall. Average hourly earnings in Santa Barbara County have been trending higher as well — as of June they were $24.15, compared with $40.69 for California.
The local hotel industry appears to be getting back on its feet, with bed taxes rising, and additional rooms now available for travelers, thanks to the Belmond El Encanto and the Wayfarer Hotel recently adding to our inventory. Santa Barbara City College and UC Santa Barbara enrollments also appear strong, which should continue to support related industries, including restaurants, bars, retail, property rentals and the like.
Although the slowing in the mortgage market has driven some local job losses, the strength of the stock market, should it continue, will provide some opportunity for additional jobs growth in the financial services sector.
Overall it appears that Santa Barbara has survived the recession, avoiding the worst of the negative consequences of the financial and real estate market collapses. Real estate values have rebounded significantly, and jobs growth, as outlined above, should continue to support a healthy economy into the future.