Welcome to the Regional Outook San Francisco, Beacon Economics' quarterly forecast for the San Francisco Metropolitan Statistical Area.  This report delivers a clear snapshot of the current state and future outlook of employment, home prices, consumer spending, personal income, and othe leading indicators in this key region of California.

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Los Angeles Labor Markets On The Mend

After bottoming out in September 2010, total nonfarm payrolls in Los Angeles have begun a slow, plodding recovery, increasing by 1% on an annualized basis for a total gain of 40,000 jobs. The household sector has shown similar strength, indicating that positions are being filled by Los Angeles residents rather than commuters from other regions. At 12.2%, the unemployment rate remains high – and slightly above the 12.0% hit earlier in the year – but it is appreciably lower than the 13% rate reached at the height of the recession. Also, it is important to note that the region’s labor force has continued to expand as formerly discouraged job seekers reenter the labor market. This has kept the unemployment rate from falling further than it might have otherwise and demonstrates increased confidence in the local job market. 

The Information sector continues to be a leader in job growth, as the Motion Picture and Technology industries have added workers to keep up with increasing demand. As consumers and businesses, across both the state and nation, have gradually increased their spending, more funds have been allocated to entertainment and business investment. These trends have helped spur job growth in two of Los Angeles’ core sectors.

Over the next few years, Beacon Economics expects the pace of job growth to pick up somewhat – to roughly 2% per year – and predicts that payrolls will surpass their pre-recession peak in late 2016. The unemployment rate will remain in the double digits until mid 2014, and will fall into the 7% range by the end of the forecast period

 

Construction Industry Showing Signs Of Life

In what may be a surprise to many, certain segments of the Los Angeles County construction market have begun to turn the corner. In this hard hit industry, there has been growth in nonresidential construction, stabilization in the single-family market, and in particular, multifamily building permits have shown strength. After sinking to a quarterly total of 1,096 during the recession, permits for multifamily units jumped to 1,794 by the third quarter of 2011, an increase of 64%. This has been driven, in part, by the foreclosure process, which has caused many households to transition from owners to renters. However, it has also been affected by increased population and job growth, which have spurred household formation and, in turn, greater demand for units.

As population density in Los Angeles continues to increase, new housing units will need to be built “up” rather than “out.” This spells demand for apartments. And with the current apartment vacancy rate at a relatively low 5.6%, demand for further building is expected. Beacon Economics expects multifamily permit activity to continue increasing at a rapid pace, surpassing the 2005 peak by mid 2015, and reaching 6,000 units per quarter by the end of 2016.