Bay Area job market suffered ‘mini-recession’ in 2023: new stats

The Bay Area job market was so feeble in 2023 that the region suffered brutal job losses for most of the year before employers mounted a massive hiring rebound in recent months, a new analysis shows.

Despite the rally in job creation, the slump that gripped the nine-county Bay Area for most of 2023 means it still has failed to regain the heights it enjoyed before the coronavirus pandemic and resulting wide-ranging business shutdowns.

Those are some of the takeaways from an analysis by this news organization of the state Employment Development Department’s (EDD) just-released revised estimates for the region’s employment picture.

“The Bay Area economy went through a ‘mini-recession’ last year based on the revised job numbers,” said Scott Anderson, chief U.S. economist with BMO Capital Markets.

Instead of adding 62,100 jobs in 2023, the nine-county region eked out a paltry gain of 4,600 jobs last year — or 57,500 fewer than originally calculated.

“All signs were pointing toward a downward revision, but the magnitude is more than I expected,” said Jeffrey Michael, executive director of the Stockton-based Center for Business and Policy Research at the University of the Pacific.

For six of the first eight months of 2023, the Bay Area lost jobs, the revised figures from the state EDD show. During that rough stretch from January through August, the region lost 27,600 jobs.

“This was a downturn,” said Russell Hancock, president of Joint Venture Silicon Valley, a San Jose-based think tank. “We saw some industries that were weaker, such as tech, and others that were stronger, such as leisure and hospitality.”

Even worse, over a longer period from October 2022 through August 2023, the Bay Area shed employment in eight out of 11 months for a cumulative loss of 31,400 jobs.

Only a remarkable surge in hiring from September through December that produced 32,200 jobs enabled the Bay Area to scrape together a modest gain for the year of 4,600 positions.

The upshot of all this, however, is that as of January 2024, the Bay Area remained 46,600 jobs below the record heights it had reached in February 2020, the final month before the business lockdowns began.

“The economic lockdowns during the pandemic were more severe in the Bay Area than in other parts of the state and other parts of the nation,” said Michael Bernick, an employment attorney with law firm Duane Morris and a former director of the state EDD.

The lockdowns produced lingering side effects for the region’s economy, Bernick believes.

“As we’ve learned during the past two years, these business lockdowns, along with the school lockdowns, came with long-lasting negative impacts,” he said. “Many small businesses never recovered, for example.”

An assessment of employment patterns in the region shows that of the Bay Area’s three major urban centers, the East Bay fared the best in 2023.

The East Bay gained 12,500 jobs in 2023, and was the primary propellant for the Bay Area economy last year.

Put another way, the two parts of the Bay Area that depend most heavily on tech jobs, the South Bay and the San Francisco-San Mateo region, suffered the worst of the job losses in 2023.

“Tech didn’t grow quite as much as we thought it did,” Hancock said. “Tech has been reducing divisions. Their reductions are more spread out than we thought. Tech is downsizing and readjusting.”

The San Francisco-San Mateo area lost 15,200 jobs in 2023, while the South Bay shed 5,900 positions.

“The initial employment reports were not fully reflecting the extent of the tech downturn,” said Michael, with the Center for Business and Policy Research.

Here are how the Bay Area’s three major urban centers fared during the first eight months of 2023, and how they snapped back with a hiring boom in the final four months of last year:

• The San Francisco-San Mateo region nosedived with a loss of 29,900 jobs during the first eight months of the year but bounced back with a gain of 14,700 jobs over the final four months of 2023.

• The South Bay lost 9,700 jobs over the first eight months of 2023 but gained 3,800 jobs during the last four months of last year.

• The East Bay gained 5,600 jobs over the first eight months of last year and added another 6,900 positions during the September-through-December months.

Compared with the pre-COVID employment heights of February 2020, the San Francisco metro area is 34,500 jobs below that pinnacle, the East Bay has a shortfall of 4,600 jobs and the South Bay is 4,300 jobs short.

The jobs deficit for the San Francisco-San Mateo region really stands out for Michael.

“It is a real possibility that San Francisco will never recover to pre-pandemic employment,” Michael said.

Despite the dreadful Bay Area job market at the beginning of 2023, experts are encouraged that the region has now gained jobs for five consecutive months.

During the five-month period that ended in January of this year, the Bay Area added 45,800 jobs. Over the same stretch, California added 203,100 jobs. In other words, the Bay Area accounted for an outsized 23% of jobs added statewide.

But the region still faces headwinds from expensive housing, a high cost of living and burdensome government red tape as it attempts to recover its lost jobs in the post-coronavirus era, experts say.

And while artificial intelligence is a promising industry, the sector appears to be years away from producing a meaningful boost to the Bay Area job market.

“The Bay Area is the new epicenter of artificial intelligence start-ups,” Bernick said. “But these start-ups so far are creating a small number of jobs.”