Just Around the Corner?

The outlook for the East Bay's labor markets has improved slightly since our last forecast. While the closing of the NUMMI plant was a blow to the region's manufacturing base, it looks like Tesla Motors will be stepping in to produce cars. Unemployment fell to 11.5% in May as the number of unemployed workers decreased by more than 3,000 and total nonfarm employment ticked up by 200 jobs. However, this is only the start of the recovery process and a return to peak employment is still a ways off. We are forecasting that nonfarm payrolls will continue growing through 2010, but that the East Bay will not reach its 2007 peak of 1.05 million jobs until 2015. The unemployment rate is expected to continue to fall as well, but won't reach "normal" levels for some years. Specifically, we forecast that the unemployment rate will remain above 10% through the first half of 2011 and won't fall below 8% until 2013. The good news is that this recession was cyclical in nature rather than structural so when the economy does recover we expect most of the regions' key sectors to recover as well.

Housing Market: Back To Basics 

The East Bay's housing market was one of the hardest hit in the entire state. Between 2000 and 2006, the median price of an existing single-family home went from $272,000 to over $610,000. By the first quarter of 2009, median prices had fallen by over 60% to $258,000. As painful as this was to investors and homeowners alike, it was a necessary evil to bring home prices back in line with incomes. During the housing bubble, the median home price went from its historical average of roughly 7-times per capita income up to more than 13-times per capita income. By the first quarter of 2010, home prices were back to a sustainable level - less than 7-times per capita income. Unlike San Francisco, which has yet to get back to its long-run average, the East Bay had gotten back to basics. For this reason, we are forecasting a return to healthy growth in home prices (driven by increases in income and population) as the region's economy heals. Keep in mind, however, that prices are not forecasted to reach their 2006 peak anytime in the next five years.

Click here to download or purchase the
2009 East Bay Economic Forecast Book.