April
2008 Quarterly Forecast > Summary
Summary
By Ryan Ratcliff
So far, 2008 has not been kind to the East Bay. Overall job growth has turned negative, homes sales are at record lows, and foreclosures continue to depress home prices. New employment estimates released last month have dramatically altered our picture of the Oakland MD in 2007. The good news: real estate related job losses were much smaller than preliminary estimates. Unfortunately, East Bay specialties like high-tech manufacturing and Education / Health Care are significantly weaker in the revised estimates, to the point where the bad news in non-real estate industries slightly outweighed the upward revision to real estate sectors. Instead of our previous story where the East Bay economy was a tug of war between real estate weakness and small gains in other sectors, these new estimates paint a more troubling picture for the East Bay: real estate weakness concentrated mostly in mortgage-related Financial Activities, coupled with a general malaise in local specialty sectors that are only indirectly tied to real estate. While it may be true for the state as whole, in the East Bay, what happens in real estate doesn’t seem to be staying in real estate.
Looking forward, there’s no relief in the immediate future. Real estate job loss will continue to be the main source of weakness for the rest of the year. The East Bay’s Construction sector will fare better than most, but its Financial Activities sector will continue to be among the hardest hit in the state. This suggests that while real estate’s impact on jobs may be less in the East Bay than elsewhere, the concentration of losses in the higher paying Financial Activities sector will mean an above average hit to personal income and local output. Other East Bay specialty industries have a similarly gloomy outlook. Silicon Valley’s high-tech manufacturing sector experienced an impressive spurt of job growth in 2007, yet similar industries in the East Bay continued to lose jobs. California’s coming budget crisis suggests further weakness in both the Education / Health Care and Government sectors, which had propped up recent job growth. The one silver lining in all this gloom is the steady growth of traffic through local ports, but we have yet to see this traffic result in bounty of new jobs. The stagnation we’ve seen so far in 2008 should continue through the rest of the year, but should not get significantly worse. We look to see some improvement at the end of the year, with 2009 seeing a return to normal growth.
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