East Bay tops area job growth

Posted on Sun, Mar. 12, 2006

East Bay tops area job growth

By George Avalos
CONTRA COSTA TIMES

The freight car of the Bay Area economy has turned into its strongest engine.

The East Bay has long been the home of blue-collar industries such as shipyards, steel mills, oil refineries and chemical plants. Its products have ranged from World War II Liberty ships to digital-age computer chips. It is an office center and a bedroom community. It contains inner cities and edge cities.

And it is increasingly the best job market in the Bay Area, creating employment that in turn bolsters the overall East Bay economy and underpins wages, retail sales and business investment.

Welcome to the Bay Area's only million-job economy. While the tech and Internet debacle erased enough jobs in the South Bay and the area containing San Mateo, San Francisco and Marin counties to drive each of those economies well below 1 million jobs, the Alameda-Contra Costa region has stayed above that benchmark through thick and thin.

"The East Bay is a locomotive of growth," said Sean Snaith, director of the Business Forecasting Center at University of the Pacific in Stockton. "And the East Bay is poised to outperform the rest of the state."

Mercedes Paz of Hercules is one of those jumping on board the train. She works in one of the East Bay's big industries, health care, which has chalked up steady growth in recent years.

Until recently a licensed vocational nurse, Paz has just found work as a registered nurse after going through a training program offered by the Workforce Development Board of Contra Costa County. The board, and its counterpart in Alameda County, is a business-led agency set up to improve the East Bay work force.

"I'm pretty optimistic about my prospects," Paz said. "I also have offers from other hospitals."

Robert Lanter, executive director of the Workforce Development Board, points to several strong industry sectors in the East Bay.

"Construction is employing people at a rapid clip," Lanter said. "We have financing and banking that continues to add people. Health care is strong. We expect a lot of growth in biotech. There is also great demand for teachers."

Other East Bay business leaders agree the East Bay's economic engines are firing on all cylinders.

"We're seeing strong hiring in all skill sets," said Ralph Henderson, San Ramon-based senior vice president with Spherion Corp. "Our San Ramon and Oakland offices are showing double-digit increases in business."

Some people who recently found work even see new strength in the battered tech sector. Danville resident Bob Purcell, a marketing executive who was out of work for some months in 2005 until he found a management position at Walnut Creek-based Reply.com, likes what he sees in high technology.

"If you have e-commerce skills and online marketing skills, there is a lot of opportunity," Purcell said.

Dorothy Chen, director of the Alameda County Workforce Investment Board, said a database of layoffs that in prior years showed job cuts of 10,000 a year now shows a drop to 5,000 a year.

"Businesses are hiring again," Chen said.

Not only is the economy in the East Bay strong, it's growing stronger. Jobs are being added much more quickly in the East Bay than in Silicon Valley and the San Francisco area, which consists of San Francisco, San Mateo and Marin counties.

What's more, over the past year, the East Bay job market expanded more rapidly than that of California and the United States.

'Second sister' status

It wasn't always this way.

For decades, the East Bay was something of an economic afterthought, the other side of the Bay from San Francisco. Later, it became that place near Silicon Valley.

"The East Bay for some time has been the second sister," said economist Christopher Thornberg with the UCLA Anderson Forecast. "Silicon Valley had that high-tech industry and San Francisco was home to finance and professional services. And the East Bay was where people lived."

In February 2001, the South Bay and the San Francisco area both had more jobs than the East Bay. All three topped 1 million.

Then came the dot-com bust and the tech meltdown. By September 2001, the South Bay slipped below the million-job mark. In January 2002, the San Francisco area followed. Neither is close to getting back.

And the East Bay? The economy whose largest city was famously lampooned as not having a "there there" has done more than simply escape the devastation that erased 205,000 jobs in the South Bay and 153,000 in the San Francisco area from 2000 through 2005. The East Bay has prospered, especially over the past two years.

Sure, it lost 16,600 jobs over the five years. But compare that with the South Bay, which lost 11 times as many, or the San Francisco area, which lost nine times that number.

Diversity is key

Why did the East Bay survive and thrive? It can thank a diversified job base.

"It's a more evenly spread out economy in the East Bay," Thornberg said. "If a region specializes in an industry cluster, it's great if that cluster does well. But it's horrible for your economy if the cluster does poorly."

It's true that the region's economy has been bolstered by housing the past several years. But analysts believe the East Bay also enjoys propulsion from a number of industries that have no close ties to real estate.

This economic diversity is why the East Bay is not perched on an economic precipice and does not face a dot-housing scenario, in the view of Tapan Munroe, a Moraga-based economist.

"We're talking about an East Bay housing boom without a bust," Munroe said. "At worst, this is a boom with a slow leak."

The East Bay economy closely resembles that of all of California, and even the entire nation. Alameda and Contra Costa counties never had their eggs wholly in the high-tech and dot-com basket. Instead, the region enjoys a broad mix of industries that are about the same size.

Housing leads the way

Nevertheless, the East Bay, like Silicon Valley and San Francisco several years ago, has turned an unusual situation into a hot economic hand. The East Bay is one of the few places left in the Bay Area with lots of spots for homes, and it can offer these wide-open spaces at a time when housing is in demand.

"California has a real estate-led economy, and the East Bay is where it's at," Thornberg said.

All of this has meant a lot of new rooftops, both residential and commercial, in the East Bay, which means numerous jobs: Construction employment accounted for 37 percent of the 18,000-plus new jobs added in the East Bay during 2005, an analysis of state labor data shows.

Thornberg has warned that the East Bay relies too much on the housing economy.

Yet even with the startling growth in construction and other real estate-related jobs, those industries do not dominate the East Bay landscape like manufacturing and tech-related services did in the South Bay economy. Manufacturing, for example, still represents about 20 percent of South Bay jobs.

In contrast, the largest East Bay industry is the very diversified professional and business services sector, with 14.6 percent of the area's total jobs. Next up is retail, with 11.4 percent of the job mix. Manufacturing is third with 9 percent. Then come health care and the leisure and hospitality industries, each with about 8 percent. Construction is sixth with 7.4 percent of the East Bay's jobs.

That means even a pronounced slump in housing is less likely to produce a real malaise. It certainly would not approach the scope of the tech implosion.

"My guess is growth will continue in the East Bay even after the housing boom is over," Keitaro Matsuda, an economist with San Francisco-based Union Bank, said.

Lagging wages

Yet by another important measure -- wages -- the region's economy has not kept up with other Bay Area urban centers. The East Bay has lower wages than the South Bay and San Francisco area, and wage growth is also much slower in the East Bay.

On the other hand, the lower pay in the East Bay could entice employers who seek to control costs.

Over the 12 months that ended in September, average annual wages in the East Bay rose 2.3 percent. Wages rose 3.8 percent in the San Francisco area and 5.8 percent in the South Bay.

Even with these blemishes, the East Bay seems strong enough to help haul the entire Bay Area economy out of its recent doldrums, Snaith said.

"The East Bay will continue to pull the other areas along with it," Snaith said. "We're all on this prosperity train."


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George Avalos covers the economy, financial markets, insurance and banks. Reach him at 925-977-8477 or gavalos@cctimes.com.





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