Presented by Beacon Economics
Welcome to The Regional Outlook, a forecast for five of California’s largest regional economies. Each quarter, find updated analysis that goes beyond the state and national level to present a snapshot of employment, home prices, consumer spending, personal income, and other leading economic indicators within key areas of the state. Visit your region of interest and subscribe for email delivery.
The East Bay labor market continues to lag those of its Bay Area neighbors, with the region’s job recovery trailing every other major metro in the state. Subsequently, the East Bay apartment market has been less impacted than nearby San Francisco’s, which is likely a result of the exodus from dense urban cities amid the pandemic.
East Bay Labor Market Falling Behind
The East Bay labor market added 7,000 jobs in October, bringing nonfarm employment to 89.5% of February 2020 levels. This marks a continued cooling off of employment growth, as month-over-month gains fell to the lowest level since July. Nonetheless, the region’s unemployment rate fell 1.4 percentage point to 8.3% in October, higher than in San Francisco (6.9%) and the South Bay (6.3%). Although the East Bay’s falling unemployment rate in the early months of the recovery was aided by a contracting labor force, in October the region’s labor force expanded significantly, adding 38,000 workers back into the labor pool. The labor force remains 1.0% below pre-pandemic levels, however.
At the industry level, the Professional, Scientific, and Technical sector led the month’s employment gains, adding 1,900 jobs from September to October. Following were the Accommodation and Food Services industry (1,600) and Health Care (1,200). The East Bay’s four largest-employing sectors (Prof/Sci/Tech, Health Care, Government, and Retail Trade) accounted for roughly 50% of all employment before the pandemic and had most of the job gains in October, nearly 64%. Payrolls in a few sectors declined in October, including Wholesale Trade (-1,000), Management (-300), and Education (-100).
Although the East Bay continued to add jobs in October, the moderating growth meant that the region recovered only 32% of the jobs lost in March and April. The East Bay trails other major metros in the state in this regard, with San Francisco and South Bay having recovered 38% and 49% respectively. Additional headwinds have reemerged, with COVID-19 cases again surging across the state and county and restrictions on activity enacted. Beyond the health implications of rising new daily cases, the new surge presents renewed challenges for the 124,000 workers who have been unemployed since February.
With just over one-third of pre-pandemic jobs yet to be regained, the trajectory of industries’ recoveries has varied significantly. Jobs in lower-paying industries, such as Accommodation and Food Services, Retail Trade, and Other Services, fell 21.0% from March to April, compared with 9.3% in higher-paying industries. And the reduction in payrolls was more heavily concentrated in lower-paying industries, accounting for roughly 81% of the lost jobs. Unlike in many of California’s major metros, however, lower-paying industries in the East Bay have not rebounded as significantly following April’s historic decline. In fact, 36% of jobs in higher-paying industries have been recovered, compared with 40% in lower-paying industries.
Apartment Rents Less Impacted Than in Other Bay Area Regions
Although the pandemic’s impact on apartment rents has been significant in San Francisco and the Silicon Valley, the effect in the East Bay has been fairly minimal. Average rent per unit in the Oakland-East Bay market was $2,294 in September, down only 3.1% from the previous year. Interestingly, the largest declines in rents were in the submarkets farthest from Downtown San Francisco: Fremont/Newark/Union City (-7.9%), East Contra Costa (-5.4%), and East Alameda (-4.3%) had the largest year-over-year changes. Meanwhile, the North Alameda submarket (Oakland and Berkeley) fell only 2.9% from the previous year, and rents in the West Contra Costa market (including Richmond) actually rose 2.8%, the only submarket in the East Bay with a positive year-over-year change. Moreover, the pandemic’s impact on East Bay apartment vacancies was essentially nonexistent. San Ramon/Walnut Creek had saw the largest change in vacancies, from 4.2% in September 2019 to 4.8% in September 2020 — an insignificant jump of only 0.6%.
On the other hand, data from the California Association of Realtors showed a surge in home sales and prices across the East Bay. In Alameda County, where the median price of existing single-family homes was $910,000 in September 2019, the figure now stands at $1.05 million, a 15.4% increase. The jump in Contra Costa County was even larger, from $656,000 in September 2019 to $793,000, a 19.4% increase. Additionally, year-over-year home sales increased 32.2% in Alameda County and 35.2% in Contra Costa County. By comparison, home sales in San Francisco and Marin counties soared 90.2% and 53.4%, respectively, and increased 11.7% and 25.4% in Solano and Napa counties.
With a slowdown in housing permits, the East Bay will continue to face challenges in growing its supply, a key variable in addressing the affordability crisis that has become a hot-button issue across the state. Nonetheless, the impact of COVID-19 on new housing in the East Bay has been much less detrimental than in San Francisco and the South Bay. Although Alameda County reported 2,058 multifamily permits filed through August 2020, more suburban Contra Costa County reported only 852. This represents a year-over-year change of -18.6% in Alameda County, and 104.8% in Contra Costa County. In contrast with these divergent snapshots, the situation for single-family permits is virtually identical in the two counties, with Contra Costa County reporting 814 permits and Alameda County reporting 846, representing year-over-year decreases of 22% and 23.4% respectively.
Overall, the East Bay’s economic recovery has lagged that of its Bay Area neighbors, but the outlook for 2021 is brighter, with vaccines soon available. So although headwinds exist in the near term, including more rigid public health mandates in response to the new surge in cases and fading support from the fiscal stimulus, East Bay growth should ramp up in the second half of 2021.
** The East Bay refers to the Oakland-Fremont-Hayward Metropolitan District, covering Alameda and Contra Costa Counties.