San Diego County's Unemployment Rate Drops

THIS IS KPBS MIDDAY EDITION. I MAUREEN CAVANAUGH. THE EMPLOYMENT PICTURE CONTINUES TO IMPROVE. LAST WEEK WE LEARNED THAT FEBRUARY'S JOBLESS RATE HIT A NEAR SEVEN-YEAR LOW. A 5.3%. IT'S EVEN WERE MORE -- MORE REMARKABLE WHEN COMPARED TO LAST FEBRUARY'S RATE WHICH WAS 7.1%. WHAT'S DRIVING SAN DIEGO'S CONTINUING JOB RECOVERY AND ARE THERE ANY WARNING SIGNS CONTAINED WITHIN THE GOOD ECONOMIC NEWS JOINING ME ARE MARNEY . WELCOME TO THE SHOW. ERIC REVOLVED IS PRESIDENT OF THE FOR POLICY RESEARCH. ________________________________________ GOOD TO BE BACK. ________________________________________ LET ME GET AN OVERVIEW. ABOUT YOUR REACTION TO THIS UNEMPLOYMENT RATE FOR SAN DIEGO COUNTY FAIR EXPECT I THINK IT'S A SIGNIFICANT INDICATOR OF A TREND THAT'S BEEN GOING ON SINCE ABOUT 2012 WHERE WE'VE HAD LOTS OF CONSISTENT JOB GROWTH IN EXCESS OF 3% PER YEAR WHICH HAS HELPED LOWER THE UNEMPLOYMENT RATE BUT THE THING THAT'S ALSO LOWER THE RATE IS ACTUALLY NOT AS MANY PEOPLE HAVE COME BACK INTO THE LABOR FORCE AS WHAT WE HAD ONCE EXPECTED WHICH WOULD MAKE IT TOUGHER FOR US TO LOWER THE RATE WITH THE JOB GROWTH WE'VE HAD. ON THE ONE HAND GOOD NEWS. ON THE OTHER HAND WE ARE STILL EXPECTING MORE PEOPLE TO COME BACK INTO THE FORCE THAT HAVEN'T YET. ________________________________________ I'LL ASK YOU MORE ABOUT THAT SECOND HALF OF WHAT YOU JUST SAID THAT I WANT TO GO TO ERIK. WHAT YOUR OVERALL REACTION TO THIS? ________________________________________ WE'RE CHUGGING AWAY. WE'VE ADDED ABOUT 40,000 JOBS YEAR OVER. IF WE COMPARE WHERE WE WORK BACK IN THE WINTER OF 2014 -- AND THAT'S A GOOD NUMBER IN TERMS OF HOW WE ARE MOVING ALONG. WE STILL HAVE I THINK TWO THINGS ON THE HORIZON WHICH ARE CHALLENGING. ONE MARNEY SUGGESTED. WE HAVE NOT SEEN PEOPLE REENTER THE LABOR FORCE AND THAT HAS KEPT WAGES AND WAGE GROWTH -- IT'S PUT A DAMPER ON THOSE BECAUSE EMPLOYERS HAVEN'T BEEN FORCED IN MANY AREAS TO RAISE WAGES TO TRY TO ATTRACT QUALIFIED APPLICANTS. AND WE STILL HAVE STRUCTURAL ISSUES WHERE WE'VE SEEN A DECENT AMOUNT OF GROWTH AT THE HIGH-END AND SOME OF THE TECHNICALLY ORIENTED PARTS OF THE ECONOMY. GROWTH IN THE SERVICE SECTOR AREAS BUT SOME OF THESE JOBS IN THE MIDDLE THAT HAVE BEEN TRADITIONALLY PLACES THAT HAVE DRIVEN WAGE GROWTH IN HOUSEHOLD INCOME GROWTH IN THE COUNTY REMAIN STUCK IN NEUTRAL. I THINK THAT THERE ARE SOME THINGS THAT WE CAN TALK ABOUT AND POLICIES WE CAN ENACT TO HELP CONTINUE TO JUMPSTART THAT AND MAKE IT -- SOME PROGRESS. ________________________________________ LET'S NAME THOSE PARTICULAR AREAS OF THE ECONOMY WHERE JOB CREATION IS STRONG AND WHERE JOB CREATION IS WEAK IN SAN DIEGO. ________________________________________ YOU CAN GO BACK TO THE RECESSION AND PROBABLY THE ONLY INDUSTRY THAT NEVER FELT DURING THE RECESSION WAS EDUCATION AND HEALTH SERVICES. THAT'S ALSO BEEN THE STRONGEST SECTOR COMING OUT OF THE RECESSION. PROBABLY CLOSE TO HALF THE JOBS THAT HAVE BEEN GENERATED IN THE ECONOMY SINCE 2008 HAVE BEEN GENERATED IN THAT SECTOR. ANOTHER PART OF THESE DORY IS WHERE DID WE USE OUR JOBS. THE CONSTRUCTION SECTOR TOOK THE MAJORITY OF THE HIT AND AS ERIK MENTIONED YOU PLUS PROBABLY ABOUT HALF THE JOBS CAME OUT OF THE CONSTRUCTION SECTOR. HERE YOU HAD GROWTH IN EDUCATION AND HEALTH SERVICES AND AT THE SAME TIME YOU HAD JOBS LOST IN CONSTRUCTION. SO CAN ASK CONSTRUCTION WORKERS ACTUALLY FIND JOBS IN EDUCATION AND HEALTH SERVICES? I THINK THAT'S THE STORY THAT ERIK WAS ALLUDING TO . WE THINK THERE IS STRUCTURAL UNEMPLOYMENT. THERE ARE PEOPLE WITH THE WRONG KIND OF SKILLS AND BACKGROUND -- MAYBE EVEN EDUCATION LEVELS -- TO TAKE ADVANTAGES OF THE AREAS THAT ARE GROWING TODAY. THAT HAS PREVENTED MIDDLE-CLASS GROWTH. THE INCOME COMPONENT THERE FROM OCCURRING HERE AT THE LOCAL AREA. ________________________________________ YOU TOUCHED ON WAGES RIGHT THERE WITH MIDDLE-CLASS GROWTH GROWTH -- LET ME GO FURTHER ON THAT WITH YOU BECAUSE YOU MENTIONED WAGES AS WELL. WE HEAR THAT WAGES ARE INCREASING MORE SLOWLY HERE IN SAN DIEGO THAN IN ANY OF THE NATION'S 10 LARGEST COUNTIES. SO WHERE IS THAT PRESSURE TO INCREASE WAGES IN SAN DIEGO? ________________________________________ WE STILL HAVE A WAYS TO GO BEFORE THE LABOR MARKET GETS TIGHT ENOUGH TO START TO SEE EMPLOYERS THROUGHOUT THE SECTORS AND -- BE FORCED OR REQUIRED TO PAY HIGHER WAGES TO ATTRACT LABOR. BUT THE OTHER TWO THINGS THAT THAT NUMBER REFLECTS IS 1 WHICH CONTINUE TO SEE GROWTH IN THE PARTS OF OUR ECONOMY WHICH FOR A VARIETY OF REGIONS JUST DON'T PAY HIGHER WAGES. IF YOU LOOK AT IT YEAR-OVER-YEAR WE'VE HAD ALMOST 8000 JOBS ADDED -- OVER 8000 JOBS ADDED IN THE HOSPITALITY AND LEISURE SECTOR. AND JUST FOR A VARIETY OF REASONS THAT SECTOR JUSTICE NOT PAY THAT HIGH A WAGE AND WAGE GROWTH IN THAT SECTOR IS RELATIVELY MODEST. AS MUDDY -- MARNEY SAID WE STILL ARE 30,000 CONSTRUCTION JOBS OFF THE PEAK OF WHERE WE WORK BACK IN MID-2006. I DON'T THINK ANYBODY WANTS TO RETURN TO THE ERA OF GOGO AND LOANS AND THROWING MONEY AT HOUSING BUT IF WE ARE GOING TO CHIP AWAY AT THIS ISSUE -- THESE DEEP STRUCTURAL ISSUES -- WE'VE GOT TO PRODUCE MORE HOUSING AND THAT IS GOOD ON THE CONSTRUCTION EMPLOYMENT SITE BUT ALSO ON THE HOUSING AFFORDABILITY SIDE WHICH IS A DRAG ON OUR REGIONAL COMPETITIVENESS. ________________________________________ I WAS READING THAT THE ECONOMIST WAS SAYING 5% -- IF THE AND -- UNEMPLOYMENT FALLS BELOW 5% WE MIGHT SEE SOME OF THAT PRESSURE TO INCREASE WAGES IN SAN DIEGO. WOULD YOU AGREE WITH THAT? ________________________________________ I THINK THE UNEMPLOYMENT RATE IS IMPORTANT AND I DON'T WANT TO DISCOUNT WHAT ALAN HAS TO SAY BUT WE ARE IN A NEW ERA IN THINKING ABOUT LABOR MARKETS AND LABOR ECONOMY BECAUSE OF HOW MANY PEOPLE HAVE DROPPED OUT OF THE LABOR FORCE AND HOW MANY PEOPLE ARE WORKING PART-TIME WHO WOULD RATHER WORK FULL-TIME. WHILE I THINK THAT THAT IS ONE MEASURE, I THINK THE MEASURE I'M LOOKING FOR IS SEVERAL MONTHS OF SUSTAINED YEAR-OVER-YEAR GROWTH. THAT EXCEEDS 40,000 JOBS ADDED TO OUR ECONOMY. TO ME IF WE CAN START TO SEE THAT MONTH AFTER MONTH AND PROBABLY CLOSE TO 50,000 JOBS A MONTH ADDED, THAT WOULD SUGGEST TO ME A LABOR MARKET THAT'S GOING TO BE TIGHT ENOUGH TO DRIVE WAGES UP. ________________________________________ I'D SAY THAT THAT UNEMPLOYMENT RATE HAS BECOME NOT A VERY GOOD PREDICTOR OF THE TIGHTNESS OF THE LABOR MARKET. KEEP IN MIND THE LABOR FORCE ITSELF HAS SHRUNK DRAMATICALLY. EVEN OF THE WORKING AGE GROUP 25 TO 54 HAVE FALLEN BY TWO OR THREE PERCENTAGE POINTS OVERALL. EVEN THE FEDERAL RESERVE IS SUGGESTING WE DON'T WANT TO LOOK AT THE UNEMPLOYMENT RATE EVEN -- ANYMORE AS THE INDICATOR. WITH INFLATION BEING RATCHETED DOWN FOR MANY REASONS BUT PRIMARILY DUE TO TO THE REDUCTION IN THE PRICE OF OIL RIGHT NOW -- IT'S ALSO SUGGESTING THAT THE UNEMPLOYMENT RATE IS PROBABLY NOT A GOOD INDICATOR FOR TIGHTNESS IN THE ECONOMY THAT WOULD LEAD TO THE GROWTH IN THE WAGES THAT EVERYBODY IS EXPECTING TO OCCUR ONCE THE UNEMPLOYMENT RATE FALLS. IT COULD FALL TO 4.5% OR 5%. MAY BE BELOW THAT. THAT GOES TO THE HEART OF WHAT ERIK WAS SAYING. IT'S A DIFFERENT ECONOMY TODAY. THOSE OLD GUIDELINES ARE NOT APPLICABLE. ________________________________________ LAST WEEK WHEN PRESIDENT OBAMA WAS TOUTING THE JOBS NUMBERS A LOT OF CRITICS CAME OUT AND SAID BASICALLY WHAT YOU BOTH HAVE BEEN SAYING. THERE ARE AN AWFUL LOT OF PEOPLE WHO SEEM TO HAVE DISAPPEARED FROM THE WORKFORCE. THEY ARE NOT LOOKING FOR WORK ANYMORE. IS IT FAIR TO SAY THAT THIS PROBLEM THAT WE'RE HAVING HERE IN SAN DIEGO WHERE WE DON'T SEE CONSTRUCTION WORKER -- WORKERS BECOMING HEALTHCARE WORKERS -- THAT THERE ARE A LOT OF PEOPLE WHO HAVE BASICALLY EVAPORATED FROM THE WORKFORCE? ________________________________________ EVAPORATED IN THE SENSE THAT THEY ARE DISCOURAGED FROM COMING BACK AND BECAUSE THEY DON'T SEE THEMSELVES AS BEING EMPLOYED IN THE OPPORTUNITIES THAT ARE CURRENTLY AVAILABLE IN THE ECONOMY. ________________________________________ LET'S TALK MORE ABOUT INTEREST RATES BECAUSE LAST WEEK THE FEDERAL RESERVE SAID THAT IT MAY RAISE INTEREST RATES AS EARLY AS NEXT JUNE. AND IF YOU COULD LET'S THE TYPICAL RELATIONSHIP BETWEEN INTEREST RATES AND EMPLOYMENT? ________________________________________ TYPICALLY YOU RAISE INTEREST RATES IN ORDER TO SLOW YOUR ECONOMY DOWN SO YOU WOULD EXPECT AN IMPACT ON JOBS. FEWER JOBS GENERATED. RIGHT NOW INTEREST RATES BEING -- IS SPUR THE ECONOMY FORWARD AND CREATE MORE JOBS. WE'VE BEEN AT ZERO OR LESS INTEREST RATE FOR A LONG TIME NOW. WE ARE STILL DISAPPOINTED WITH THE JOB GROWTH AT THE NATIONAL -- NOT SO MUCH AT THE LOCAL LEVEL. WE'RE DOING PRETTY GOOD HERE BUT IT'S THE QUALITY OF JOB GROWTH THAT GETS US CONCERN. IF WE ARE STILL DISAPPOINTED WHEN YOU WANT TO RAISE INTEREST RATES AT THIS TIME? ARE YOU FEEL FULL THAT IT WILL SLOW THE ECONOMY DOWN IN THE FEDERAL RESERVE DOESN'T KNOWS. WE ARE IN UNCHARTED TERRITORY. THERE ARE A COUPLE OF THINGS THAT ARE GOING ON IN THE WORLD TODAY THAT ARE ALSO INDICATING A RISE IN INTEREST RATES MAY NOT BE GOOD. THAT IS THE VALUE OF THE DOLLAR WHEN YOU COMPARE US WITH OTHER AREAS. THE VALUE OF THE DOLLAR HAS BEEN RISING AND MAKES OUR GOOD -- GOODS LESS COMPETITIVE OVERSEAS FOR SALE. FEW OF THEM WILL BE SOLD OVER THERE SO THERE WOULD BE FEWER JOBS PRODUCING THOSE GOODS. THEN YOU WOULD HAVE RISING INTEREST RATES A RISING DOLLAR IN BOTH OF THOSE FORCING POTENTIALLY JOBS DOWN. IT'S TOO BIG OF A RISK IN LIGHT OF THE VERY SMALL BUT POSITIVE RATES OF GROWTH THAT WE'VE SEEN AT THE NATIONAL LEVEL STILL NOT BACK UP TO TREND WHICH IS ABOUT 3.6%. WE ARE STILL AT 2.2%. THAT'S A LOT OF RISK TO ENTER AND IT MAY NOT EVEN THE SMALL OF GROWTH -- AMOUNT OF GROWTH. ________________________________________ CONSIDERING WE MAY BE IN THIS NEW DYNAMIC WHERE WE ARE NOT SURE WHETHER THE OLD RULES APPLY WHEN IT COMES TO THE UNEMPLOYMENT RATE AND WHAT THAT MEANS. INTEREST RATE INCURRED -- IS THERE AN AREA IN WHICH WE ARE FAILING TO ADDRESS THE SITUATION WITH POLICY? IN OTHER WORDS THINK ABOUT THE CONSTRUCTION WORKERS WHO USED TO HAVE GREAT JOBS HERE IN SAN DIEGO. THOSE JOBS DON'T SEEM TO BE COMING BACK AND YOU LOOK ON IT IN A NATIONWIDE BASIS WHERE THERE ARE POCKETS OF PEOPLE WHOSE JOBS ARE NOT COMING BACK. HAVE WE ADDRESS THAT ADEQUATELY? ________________________________________ I'LL ANSWER THAT BOTH AT THE LOCAL AND LEVEL. AT THE LOCAL LEVEL I'M LESS CYNICAL OR AN OPTIMISTIC ABOUT THOSE CONSTRUCTION JOBS. WE CAN GET THOSE CONSTRUCTION JOBS BACK IF WE WOULD GET BACK INTO THE MODE OF THINKING ABOUT ENTITLING PROPERTY IN GETTING CONSTRUCTION PREVENTS -- PERMITS OUT THE DOOR. IT REMAINS A CHALLENGE IN OUR REASON -- REGION. THE LOCAL GOVERNMENT RESPONDING TO THE LARGEST CLAMORS AGAINST HOUSING AND THAT'S WHY YOU'VE SEEN HOUSING PERMITS AT A DEPRESSED LEVEL AND A CHALLENGE UNDER GETTING PROJECTS BUILT. WE CAN DEAL WITH THAT. AT THE BROADEST LEVEL WE HAVE A NATIONAL CONVERSATION TO HAVE ABOUT HOW WE TRAIN PEOPLE AND HOW WE HAVE THE OPPORTUNITY FOR PEOPLE TO ACQUIRE NEW SKILLS IN AN ECONOMY WHERE SKILL OBSOLESCENCE IN THE RATE OF SKILL OBSOLESCENCE IS BECOMING MORE AND MORE OF A PROBLEM IN MORE AND MORE RAPIDLY SORT OF MOVING PEOPLE OUT OF COMPETITIVE PLACES IN THE ECONOMY TO NOW BEING THE HOLDER OF OBSOLESCENCE SKILLS. AND WHETHER THAT IS INVESTING IN ADDITIONAL EDUCATION RESOURCES WERE BEGINNING TO RETHINK HOW WE DEAL WITH A TRAINING ON THE PRIVATE AND THE PUBLIC SIDE. IT'S PROBABLY A CONVERSATION WE HAVE TO START TO HAVE IN THIS COUNTRY IF WE WANT TO DEAL WITH INCREASING WAGE GROWTH. ________________________________________ I WOULD ADD TO THE LOCAL PROBLEM -- THE DEMISE OF THE REDEVELOPMENT DISTRICT HERE IN THE STATE OF CALIFORNIA. PROBABLY 70+ PERCENT OF THE PERMITS THAT WERE ISSUED IN THE LAST 10 TO 15 YEARS HAVE BEEN ISSUED IN REDEVELOPMENT AREAS. THAT'S WHERE MOST OF THE GROWTH WAS OCCURRING TO MAKE YOUR POINT. IF IT DOESN'T GO THERE WHERE YOU ARE PLANNING FOR IT STARTS TO SPRAWL OUT AND YOU WILL BE BACK INTO A WORLD OF HEADBUTTING BETWEEN THE ENVIRONMENTALIST WHO DON'T LIKE SPRAWL AND WHERE THE DEVELOPERS OR DEMAND FOR THE HOUSING -- THE DEMISE OF THE REDEVELOPMENT DISTRICT REALLY CAUSES PROBLEMS THERE. THE OTHER THING I'D POINT OUT IS THERE WAS CLEAR DIFFERENCES IN WHO WAS IMPACTED DURING THE RECESSION AND THOSE WITH LOWER LEVELS OF EDUCATION WERE IMPACTED THE MOST IN THEIR -- THEY ARE STILL HAVING ELEVATED LEVELS OF UNEMPLOYMENT AND A VERY DIFFICULT TIME GETTING BACK IN TO THE WORKFORCE. BACK TO THE POINT ABOUT IS THE HIGH SCHOOL EDUCATION THE CORRECT LEVEL TODAY? I THINK PRESIDENT OBAMA BROUGHT THAT TO THE TABLE WHEN HE SAID IT MAY BE THAT WE NEED TO EXTEND OUR EDUCATION SYSTEM ALL THE WAY TO THE FIRST TWO YEARS IN A JUNIOR COLLEGE IN ORDER FOR PEOPLE TO QUALIFY TO GET INTO -- I DON'T KNOW IF THAT'S THE RIGHT ANSWER BUT I THINK THE CONCEPT THAT A HIGH SCHOOL EDUCATION IS ADEQUATE TO BEGIN A CAREER IS PROBABLY NO LONGER TRUE IN THE ECONOMY. AS A SOCIETY WE ARE GOING TO BUCK UP AND DO SOMETHING ABOUT IT. THAT MAY BE ONE OPTION BUT IT'S NOT THE ONLY ONE. ________________________________________ I HAVE ABOUT ONE MINUTE LEFT AND I WANT TO ASK YOU BOTH -- WHAT DO YOU SEE HAPPENING FOR SAN DIEGO'S ECONOMY DURING THE REST OF 2013. ________________________________________ I SEE NO REASON WHY OUR JOB GROWTH WOULDN'T CONTINUE AT THE 3% LEVEL MEANING WILL DO MUCH BETTER THAN THE NATION. ON THE OTHER HAND I DO SEE THAT WILL HAVE TROUBLE GENERATING WHAT I WOULD CALL HIGH-VALUE ADDED HIGH-PAYING JOBS THAT WILL CONTINUE TO BE A PROBLEM AND I POINT TO -- WE CONTINUE TO SEE VENTURE CAPITAL FUNDS FLOW INTO THE REGION HERE WHICH ARE THE SOURCE OF FUNDS FOR HIGH-VALUE ADDED JOB GROWTH. AT A FALLING AMOUNT NOT ONLY FALLING AMOUNT IN TERMS OF AMOUNT COMING HERE BUT FALLING IN TERMS OF PROPORTION OF TOTAL VENTURE CAPITAL NATIONWIDE. I THINK THAT'S A LONG-TERM PROBLEM THAT SAN DIEGO NEEDS TO RECTIFY. ________________________________________ I THINK THAT'S RIGHT AND WILL PROBABLY CONTINUE TO SEE ABOUT 40,000 JOBS ADDED ON A YEAR OVER BASIS THROUGHOUT THE REST OF 2013. THE NUMBER THAT I'M GOING TO LOOK AT IS CAN WE MOVE OFF OF THIS ABOUT 60,000 CONSTRUCTION NUMBERS. CAN WE START TO SEE THAT RATCHET UP CLOSER TO 70 CAN WE START TO SEE THAT RATCHET UP CLOSER TO 74/70,000 BY THE END OF THE YEAR? TO ME THAT SHOULD TRANSLATE INTO INCREASED HOUSE LOAD -- HOUSEHOLD INCOME WHICH WILL BE GOOD FOR THE ECONOMY OVERALL. ________________________________________ THANK YOU BOTH. I'VE BEEN SPEAKING WITH MARTY COX AND ERIK BRUVOLD. THANK YOU SO MUCH.