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The massive 10-year home-price spike to 2022 was more than the economy could bear and has done a lot of damage, including to employment, as we can see.
By Wolf Richter for WOLF STREET.
Highly paid jobs in tech and professional and scientific services in San Francisco and in the northern part of Silicon Valley – the San Francisco-San Mateo-Redwood City, CA, Metropolitan Division – started to vanish in the second half of 2022, and this continued through April, despite all the ballyhooed AI-related hiring, per the employment data from the Bureau of Labor Statistics today. And this longer-term trend, along with other factors, is deflating the majestic housing bubble, which we’ll get to in a moment.
Jobs in Information fell to 107,700 in April, the lowest level since June 2020, having now undone nearly the entire hiring boom in that industry during the pandemic. That hiring boom had occurred even as Leisure & Hospitality, Retail, Healthcare, etc. were gutted by massive layoffs.
Since the peak in August 2022, the Information industry has shed 25,400 jobs, or 19% of its total jobs. These jobs are at facilities where people primarily work on web search portals, data processing, data transmission, information services, software publishing, motion picture and sound recording, broadcasting including over the Internet, and telecommunications.
During the Dotcom Bust, the Information industry lost 46% of its jobs in this metro, beginning in late 2000 and bottoming out in mid-2006, and then it remained low for another four years, before taking off again. In this tech-employment bust so far, the industry has shed “only” 19% of its jobs.
This metro-level data on nonfarm payroll jobs from the Establishment Survey was released today by the Bureau of Labor Statistics. These jobs are tracked by business location to which the employee is assigned, regardless of where the employee lives. If a worker commutes from the East Bay to an office in San Francisco, it counts as a job in this Metropolitan Division. Same with remote employees.
Despite the job destruction, the Information industry still accounted for 9.5% of total payrolls in April. For the US overall, jobs in Information account for only about 2% of total nonfarm payrolls. That’s how tech-heavy employment in the area is, compared to the US overall.
Professional, Scientific, and Technical Services industries have shed 21,600 jobs since the peak in June 2022, or 9.4% of their total employment. With 207,800 jobs in April, the sector is back where it had been in June 2020.
This big broad sector accounted for 18.3% of total employment in the two-county area. It includes engineering and design services; computer services; consulting services; research services; advertising services; and many other professional, scientific, and technical services.
During the Dotcom Bust, the sector lost 28% of its jobs in the metropolitan division through October 2003. But given how much broader the sector is, it didn’t drop nearly as much as Information, and recovered much faster.
Combined, Information and Professional, Scientific, and Technical Services shed 47,000 payroll jobs since the peak in mid-2022 in the two counties.
But total nonfarm employment, including government jobs, dropped even more since June 2022: by 56,000 jobs. The absolute peak of employment in the two counties occurred in November 2019 with over 1.2 million payroll jobs. Since then, the two counties have shed 71,000 jobs.
The plunge in overall payrolls during the pandemic was driven by Leisure & Hospitality, Retail, Healthcare, and some other industries, that have now largely recovered.
During the Dotcom Bust through 2003, the two-county area lost 16% of its total payroll jobs, a depression-type decline if it were spread across the country. Compared to the Dotcom Bust, the current decline of 5.9% from the peak is relatively moderate.
And so home prices gave up some big gains.
Condos and co-ops: In the city of San Francisco, prices of mid-tier condos, seasonally adjusted, edged down in April, are down by 14.6% from the peak in May 2022, according to the seasonally adjusted Zillow Home Value Index (ZHVI).
Condo prices are back to where they’d first been in May 2015, that was 10 years ago!
But over the decade from 2012 through the peak in May 2022, condo prices doubled. Since then, condo prices have given up nearly one-third of the decade-long price spike.
Condos and Co-ops account for about half of the home sales in San Francisco. Nearly all new construction over the past two decades has been multifamily (condos and rentals).
Single-family homes: In the city of San Francisco, prices of mid-tier single-family houses edged down by a hair in April, seasonally adjusted, bringing the decline since the peak in May 2022 to 15.1%. Prices are now back where they’d first been in mid-2018.
In the decade from 2012 to the peak in May 2022, single-family home spiked by 160%. And that has turned into a huge problem for the economy, as we can see in the employment data.
Slowly undoing the damage of the “Housing Crisis.” Some years ago, these price spikes in houses and condos, along with rent spikes, created the “housing crisis,” as it was called in the local media, where regular people with good jobs, such as teachers, could no longer afford to live in the City. Housing had become too expensive for the economy to bear.
That principle also shows up in the payrolls, as super-high-priced housing forces employers to offer super-high wages, and creates a very high cost of doing business. For employers that can move their workforce to cheaper areas, an exit is a major cost-cutting solution. And many big-name employers have done precisely that over the years.
But a long-term drop in home prices may eventually undo the damage that the mindboggling 10-year price spike has done to the economy.
In case you missed it: Housing Bubble & Bust #1 and #2 as Seen through Employment at Mortgage Lenders: They Shed Jobs Again, 38% Gone
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The post As Tech Jobs Plunge in San Francisco & Silicon Valley, Housing Reacts: Condo Prices Drop Back to 2015, Single-Family Home Prices Back to 2018 appeared first on Energy News Beat.
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