The housing boom beneficiary sectors are exerting a greater and greater drag on overall job growth, but employment outside of those sectors has been healthy enough to shake it off.
The construction, retail, and finance/real estate sectors, which I believe grew artificially and unsustainably bloated as a result of the region’s prolonged housing boom, have collectively shrunk 2.7 percent since January 2006. Over the past year, the construction industry lost 3,800 jobs or 4.2 percent, retail lost 2,500 jobs or 1.7 percent, and finance/real estate lost 2,400 jobs or 2.9 percent. (The sharp drop in retail empoyment, and to a lesser extent in construction employment, is seasonal — this is why I focus on the year-over-year changes).
Outside of these three sectors, the San Diego economy gained 21,900 jobs or 2.3 percent. That’s a pretty robust level of job growth. However, the losses in the housing boom beneficiary sectors pulled the overall employment increase down to 13,200 jobs or 1.0 percent.
I expect that construction employment will continue to decrease as builders finish up works-in-progress. The financial sector is also likely to shrink as a result of the ongoing subprime lending debacle, which despite analyst claims to the contrary is definitely not over. The retail sector could contract as fewer and fewer people are able to withdraw money from the housing ATM and as formerly high-flying housing industry employees reign in the spending, though it’s also possible that retail could be propped up by strength in other job sectors.
In short, I expect housing boom beneficiary sector employment in total to continue its decline in the months ahead. But continued strength in other areas of the economy could go a long way towards blunting the impact of housing industry job losses.
— RICH TOSCANO