What do you foresee will be the primary source of job growth investments in 2022?
- Businesses (57%, 25 Votes)
- The federal government (23%, 10 Votes)
- State and local governments (20%, 9 Votes)
Total Voters: 44
The ongoing impacts of the 2020 recession and COVID-19 pandemic continue to stretch out California’s path to a full jobs recovery.
Being the most populous state, California maintains the largest job market in the nation. But compared to the December 2019 pre-recession peak, California is still 7.4% behind in terms of job numbers. California is gradually regaining these jobs, but in starts-and-stops, with progress to full recovery remaining slow.
In relation to other states, California is:
- 9th slowest in the nation in its path to a full jobs recovery; and
- 4th highest in unemployment, according to an OC Register analysis of Bureau of Labor Statistics (BLS) data.
Until California returns to full employment, its housing market will remain hampered. Without jobs, renters are unable to pay rent or save up to become first-time homebuyers. Further, lacking the support of incomes, homeowners cannot continue to pay their mortgage payments. Until recently, these jobless residents have remained sheltered by the foreclosure and eviction moratoriums, but these are now over.
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More concerning than unemployment numbers, which can be misleading, California has a Labor Force Participation (LFP) Rate of 61.2%. The LFP rate accounts for the percentage of the population that is actively seeking employment — regardless of whether or not they are already employed. The LFP rate is beneficial for Real Estate professionals to be aware of, especially in terms of accounting for future economic conditions. A steep drop in California’s rate occurred during the 2020 recession when many residents stopped looking for work, choosing instead to stay home to take care of immune-compromised family members or simply retire early. When LFP declines, household wealth follows suit.
The domino effect across the housing market
As we move forward in this recovery process, jobless homeowners will be forced to sell. Government intervention shielded homeowners for a year-and-a-half following the sudden onset of the recession in 2020. Now that the moratorium is up — and millions of jobs are still missing — the delayed impacts will finally be felt in the housing market, causing:
- inventory to rise; and
- home prices to decrease, expected going into 2022.
For a forecast on a stable return to home sales, look first to the jobs recovery, which will vary across the state. As in the recovery from the 2008 recession, jobs will return first in California’s urban city centers, with economic success rippling out to inland areas.
At the current pace of recovery, a consistent jobs recovery won’t be likely until around 2024-2025. At that time, home sales volume and prices will find stable support from homebuyers and sellers eager to participate in a booming economy.
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