by Bill McBride on 12/17/2011 09:21:00 PM
Saturday, December 17, 2011
I've been tracking the employment situation in California's Inland Empire since 2005. I expected housing and construction dependent areas like the Inland Empire to be hit hard during the housing bust. Sure enough, the Inland Empire was considered "ground zero" for the housing bust (along with Las Vegas, Phoenix, Sacramento, most of Florida and several other areas). Now the employment situation is finally starting to improve a little.
From the North County Times: [Local] Job picture improves in November as economy begins to heal
California's jobless rate dipped to 11.3 percent in November from 11.7 percent the previous month, with 6,600 jobs added ... The state's jobless rate was the lowest since May 2009.In 2005, I wrote:
Riverside County's unemployment rate fell to 12.8 percent in November, down from a revised 13.7 percent in October and sharply lower than the year-ago estimate of 14.8 percent.
Of all the areas experiencing a housing boom, the areas most at risk have had the greatest increase in real estate related jobs. These jobs include home construction, real estate agents, mortgage brokers, inspectors and more. ... I believe that areas like the Inland Empire will suffer the most when housing activity slows.And in 2006, in response to a sanguine forecast from a local economist, I wrote: Housing: Inverted Reasoning?
[W]hat happens during a housing bust? Just look at the unemployment rate in the previous bust.Click on graph for larger image.
The unemployment rate in California rose from 5.2% to 10.4% in just over two years. For the Inland Empire, the unemployment rate rose from 4.8% to double digits in the same period, peaking at 12.4%. ... As the housing bubble unwinds, housing related employment will fall; and fall dramatically in areas like the Inland Empire. The more an area is dependent on housing, the larger the negative impact on the local economy will be.
This graph shows the percent of construction employment and the unemployment rate for the Inland Empire.
With the housing bust, the percent construction employment declined sharply and the unemployment rate peaked at 15.1%. Hey, Hoocoodanode?
But now it appears the California economy is starting to slowly improve - even in the Inland Empire. The unemployment rate is falling, and it appears construction employment has bottomed.
But look at the Inland Empire unemployment rate following the previous housing bust (early 90s). The unemployment rate only declined gradually over several years. That is probably what will happen this time too - I expect the areas that were most dependent on housing and construction during the bubble to see the slowest employment recovery over the next few years.
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