The Sacramento region’s unemployment rate stood at 4.8 percent in June, marking the third consecutive month in which it has stayed below 5 percent, according to figures released by California’s Employment Development Department on Friday.
The last time unemployment was that low for three consecutive months was during the waning days of the housing boom in 2006.
The June statistic follows months of steadily decreasing unemployment in the area, which includes Sacramento, El Dorado, Placer and Yolo counties. The Sacramento region began the year with an unemployment rate of 5.3 percent.
“It’s definitely an improving economy in the region and statewide, but I guess there’s more to it than that,” said Jeffrey Michael, director of the University of the Pacific’s Center for Business and Policy Research. “Good news, but with a few nuances that are important to understand.”
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One such nuance: The Sacramento area’s decreasing employment is partly the result of demographic trends, not just an economic upturn.
Sacramento’s job growth in the last decade has lagged behind other areas in California, particularly the Bay Area, Michael said. But the region’s unemployment rate was roughly even with the seasonally adjusted statewide unemployment rate of 4.7 percent, which was unchanged from May.
Because the Sacramento region has a smaller and shrinking share of its population in the workforce, it has outpaced statewide unemployment rates in its decline, Michael explained. From 2010 to 2016, the area’s labor force grew by less than 1.5 percent while population swelled by about 8 percent, according to data from the EDD and bestplaces.net, a geographical data site.
That low workforce participation could have a number of explanations, according to Michael. Perhaps it’s because more residents are retiring. Or perhaps it’s because families seeking more affordable living are moving to the Sacramento region while younger, single workers are moving to places like the Bay Area.
Could the unemployment rate go lower? Yes, Michael said – some areas sustain unemployment rates as low as 2.5 percent. Four counties in the Bay Area, for example, posted rates below 3 percent in May. But according to Michael, those lower rates can bring challenges as well, making it difficult for employers to fill jobs.
This month’s loss of 1,400 payroll jobs statewide is “not surprising, or cause for alarm,” said Michael Bernick, a San Francisco labor lawyer and former director of the EDD. The loss is offset by 17,600 payroll jobs gained in May. But he said it suggests that the state’s employment growth, which has continued for 87 months, “may be slowing or even ending.”
“The current employment expansion is still short of the 113-month expansion in the 1960s in California, but one of the longest periods in the post-World War II period,” Bernick said.
California’s unemployment rate is slightly higher than the national rate of 4.4 percent.
Hospitality and leisure, healthcare and financial services were among the fastest-growing job sectors in the Sacramento region over the past year.
The number of education and health service positions in the area grew by 4.5 percent. Finance increased 5.7 percent. Hospitality and leisure – which includes sectors like entertainment, accommodations and restaurants – grew by 5.2 percent.
Sharokina Shams, spokeswoman for the Sacramento-based California Restaurant Association, said she was not surprised by the numbers given the growth she’s observed in the local food scene. She said Sacramento is “seeing sort of a restaurant revival,” especially downtown following Golden 1 Center’s opening last fall.
Most of all, Shams said, Sacramento is still affordable for small businesses.
“There is an influx of people, and that includes people starting businesses, coming to this area from the Bay Area,” Shams said. “In the Bay Area, restaurants are having an incredibly tough time continuing to do business because of rising costs.”
Deneb Williams, CEO and chef for WM Restaurants, has noticed that trend as well among both companies and employees relocating. The former executive chef of local restaurant The Firehouse hired over 40 people in the last six months as he and his wife launched two eateries in Sacramento. About half of the chef resumes he gets are from Bay Area residents presumably looking for cheaper living, he said.
That’s lucky, according to Williams, because with more and more restaurants hiring, it’s becoming hard to find qualified people for positions that require skills and experience.
Williams thinks impending minimum wage hikes might curtail job growth in his industry, but at least for the near future, he’s still adding positions. He’s opening a third restaurant soon.
Janet Ruiz, California representative for the Insurance Information Institute, attributed recent growth in local insurance jobs – which accounted for half of the finance sector jobs added over the past year – to nationwide trends.
According to Ruiz, insurance companies are losing lots of Baby Boomer employees to retirement and are hiring to replace them. Even as some work is automated, she said the industry still needs many employees to do work like IT and data analysis.
“This is a good sign of the growth of the economy,” Ruiz said. She’s confident the hiring will continue.
Companies in the health sector are growing as well. Dignity Health, for example – which operates six hospitals in the greater Sacramento area – will be adding 50 doctors and 120 support staff for a Citrus Heights facility slated to open in 2019, according to spokesperson William Hodges.
Michael cited healthcare as one area in which the region’s new jobs may be lower paying.
“The problem is that in recent years the majority of health job growth has been in lower-paying social assistance occupations, and that the majority of (professional and business services) growth has been in lower-paying support sectors like private security guards and temp agencies rather than higher-paying professional stuff,” Michael said.
On the whole, though, local wages have risen over the last few years. The average weekly salary rose from $998 five years ago to nearly $1,077 in 2016, according to the Bureau of Labor Statistics’ data. According to Michael, declining unemployment tends to push wages higher. Increases in the minimum wage have kicked in recently, too.