East Bay

Welcome to The Regional Outlook, a forecast for five of the state’s largest metropolitan 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 (Oakland MD) closed out 2022 with slower job growth than initially estimated. In March, the California Employment Development Department (EDD) released annual benchmark revisions to their monthly employment survey estimates. These revisions indicate that the East Bay labor market has been growing slower than originally believed.

Every year, the EDD revises its monthly survey estimates with the Quarterly Census of Employment and Wages (QCEW), which covers roughly 97% of all wage and salary employees in the nation. Prior to this revision, the EDD estimated employment in the East Bay increased by 2.8% from December 2021 to December 2022. The revised estimates place employment growth at 1.9%. Although employment growth occurred slower than initially estimated, the broader economy continues to improve, with most major indicators trending in the right direction. However, the East Bay’s employment recovery has lagged other local economies. By February 2023, the region had recovered 99.6% of the jobs lost during the pandemic.

Despite some headwinds, Beacon Economics is maintaining its slow growth/no recession outlook, both nationally and locally. While the labor market provides important insight into the local economy, business and consumer spending is also crucial. When businesses spend money locally, they create jobs, generate income for residents, and contribute to the overall economic growth of a region. This can result in a multiplier effect, as the money spent by businesses circulates throughout the local economy, creating further opportunities for growth. Similarly, when consumers spend money at local businesses, they keep money circulating throughout the community, which can lead to increased employment and business growth.

Sales tax receipts data from HdL Companies shows that business and consumer spending continues trending above pre-pandemic levels. Since the first quarter of 2020, sales tax receipts in Contra Costa County increased by 23.6%. This was marginally slower than Alameda County, which rose by 26.1%.  A more detailed breakdown of the East Bay economy shows that spending in nearly every category has increased. Fuel and Service Stations, for example, increased by 51.6%. This jump is unsurprising, given the increase in the cost of oil and the relatively inelastic demand for travel (not as price sensitive). The weakest category for spending was Food & Drugs, which increased by 0.7%. This category primarily evaluates grocery stores, and the decline might not come as a surprise given the slowdown in population growth.

Despite headlines about tech layoffs and bank runs, Beacon Economics expects the consumer to keep the economy afloat in the near term, in line with the improvements seen in the labor market. Steady gains in payrolls in the local economy over the last year have driven the unemployment rate below 4% in the region, a -1.3%  decrease from last year. With the unemployment rate back to its pre-pandemic level, and non-farm employment inching toward all-time highs, Beacon Economics is forecasting East Bay employment levels will continue expanding throughout 2023. Non-farm employment is projected to grow at a steady pace of around 1-1.5% for the year, while unemployment will likely hover around the 4% mark for the balance of 2023.

Unlike the labor market, housing continues showing signs of weakness. Rising interest rates have taken a toll, making mortgages more expensive and sidelining would-be homeowners. As a result, home price growth has decelerated, and there has been little relief in terms of new housing production or new inventory of homes on the market. Higher frequency data from Zillow shows a synchronized decline in home price growth, with many markets in California starting to see negative year-over-year growth in home prices.

In Alameda County, home prices were down 3.5% in February 2023 compared to a year ago, roughly the same as in Contra Costa County. At the same time last year, home price appreciation in the East Bay was in double-digit territory. However, as it stands, there is a very limited supply of homes for purchase on the market. Many homeowners opted to refinance when mortgage rates ticked down to all-time lows during the onset of the pandemic. Since then, the cost of owning a home has risen rapidly, shrinking the number of buyers that can afford to enter the homeownership market and likely keeping many who already own from considering a move. As a result, Beacon Economics is forecasting further, although modest, year-over-year price declines in the East Bay’s housing market in 2023.