All economies, big and small, are made up of just two inputs: labor and capital. This is why when looking at investing in property one should take into account the labor market. California is broken into five Metropolitan Divisions (MD), which the U.S. Census Bureau defines as:
"A smaller group of counties or equivalent entities defined within a metropolitan statistical area containing a single core with a population of at least 2.5 million."
The reason we are looking at Metropolitan Divisions is that it offers a great overview, without being so detailed that the results are too specific for understanding the overall economy of a region. This data is maintained by the Federal Reserve Economic Database (FRED). Before we rank the 5 major labor markets in California, let's set the table. We are looking at how the job market has changed from the beginning of 2014 to May of 2018; four-plus years is a strong sample size, and 2014 is far enough from the end of the 2007 recession to remove fears about data distortion. For reference, overall the entire state of California saw an 11.1% increase in employment over this timeframe.
5. San Rafael, CA 5.5% employment growth
Coming in last at less than half the State average for employment growth, San Rafael is not just a victim of the 2007 recession but actually saw home prices contracting about two years before the recession. Though, investors in the area should be pleased to hear that home prices seem to be steadily climbing over the last few years. Increasing wages have helped drive this positive growth.
4. Los Angeles-Long Beach-Glendale, CA 7.7% employment growth
Despite a plummeting unemployment rate, the Los Angeles-Long Beach-Glendale Metropolitan Division has been unable to generate average job growth. This could be for a few economic issues facing the area, but the primary appears to a relatively stagnant post-recession average wage.
3. Anaheim-Santa Ana-Irvine, CA 10.7% employment growth
With a near identical employment growth rate as the State as a whole, Anaheim-Santa Ana-Irvine combination of student life, tourism, and business offers a great microcosm of the State itself. The area is also boasting a thriving and growing professional and business market.
2. Oakland-Hayward-Berkeley, CA 12.5% employment growth
The Oakland-Hayward-Berkeley area boasts a strong employment growth rate with exploding manufacturing and construction markets, even though the ever-important information sector has been stagnant and appears as it will not reach its post-recession level. The market appears to be reliant on lower-paying industries, which should be considered when weighing the clearly booming labor market.
1. San Francisco-Redwood City-South San Francisco, CA 16.0% employment growth
This probably comes as little surprise to those familiar with California, the San Francisco region is posting great growth numbers. More importantly, this growth is spurred by in-demand and recession resistant jobs in technical and scientific fields. With job growth not just high, but growing on the back of in-demand fields which is translating to dramatic wage growth, these economic factors create the strongest labor market in California.
While opportunity exists in all these Metropolitan Divisions, we hope this overview on the labor market of each improves your understanding on one of the most important aspects of a local economy, and help you decide where to invest. Please contact us for all your Investment financing needs.