The Bay Area job market is still growing but the pace is slowing, which raises a sobering question: Is the current slowdown a soft patch or a harbinger of job losses ahead?
No one knows for certain, of course, but most experts remain upbeat about the Bay Area economy and some say it should be expected that job growth here would slow after a prolonged period of far better job gains than seen in the state or the nation. A fresh update comes Friday, when the state releases its monthly jobs figures.
"There are always some trouble spots, but this slowdown doesn't necessarily spell a downturn," said Jeffrey Michael, director of the Stockton-based Business Forecasting Center at University of the Pacific.
In the 12 months that ended in April, job totals in the Bay Area grew by an annual rate of 2.3 percent, according to an analysis by this newspaper of seasonally adjusted figures released by the state's Employment Development Department.
That's ahead of the annual pace for California job growth of 1.9 percent and far more robust than the national rate of growth of 1.6 percent, an analysis of state and federal labor statistics shows. Still, caution flags have been raised because the Bay Area's 2.3 percent rate of growth is far below the peak of hiring activity that was reached in December, when the job market in the nine-county region was expanding by 3.6 percent on an annual basis.
"You can see that growth has slowed in the Bay Area," said Jordan Levine, director of economic research with Beacon Economics. "We had the tax increases associated with the fiscal cliff go into effect at the beginning of the year. Then the sequester started to kick in recently."
The Bay Area added 73,300 jobs in the one-year period that ended in April, a mere two-thirds of the 113,000 jobs added in the yearlong period that ended in December.
"California is also slowing, but the deceleration in the Bay Area is a bit more pronounced than it is statewide," said Scott Anderson, chief economist with San Francisco-based Bank of the West.
In December, the Bay Area accounted for 35 percent of the job gains statewide. But by April, its share of annual job gains in California had shrunk to 27 percent.
"In some ways, a slowdown could have been expected," said Michael Bernick, a research fellow with the Milken Institute and a former director with the EDD. "The Bay Area was at a very fast growth rate, one of the fastest in the nation."
So far, job growth in the South Bay isn't slowing as rapidly as in the region's other major urban centers, the East Bay and the San Francisco-San Mateo-Marin region.
During the 12 months that ended in April, the South Bay enjoyed a job growth rate of 2.7 percent, while the East Bay's rate was 1.4 percent and the San Francisco metro area's was 2.6 percent. In the final two months of 2012, annual rates of job growth peaked at 3.9 percent in the South Bay, 4.3 percent in the San Francisco region and 2.8 percent in the East Bay.
The downshift isn't necessarily a cause for alarm or a signal of a devastating downturn in the economy, analysts say. Compared with California overall or with the nation, job growth here remains strong, notes Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy.
"Even though the Bay Area has slowed from a 3.5 percent annual growth rate to a more than 2 percent growth rate, that is still better than the country or the state," Levy said. "The Bay Area is still well above the national growth rate."
University of the Pacific's Michael said a slowdown of the Bay Area's job market is not surprising after strong gains last year as the overall economic recovery gained momentum.
"You can have job growth when you have slack labor markets with a lot of unemployed workers; companies put those resources to work, and the economy grows quickly," Michael said. "Once the slack is out of the system, rising labor costs put constraints on how much more hiring you can do. At some point, the economy glides back toward equilibrium."
He said rising home prices in many Bay Area neighborhoods, pushed up by the rebounding economy, also can serve as a drag on further economic growth because high housing costs deter companies from moving to the area and make it difficult for firms already here to recruit workers to the area.
Michael Yoshikami, founder of Walnut Creek-based investment firm Destination Wealth Management, said another drag on the region's economy is the sluggish pace of the national recovery.
"Although there are industries in the Bay Area such as technology that are driving job growth, the reality is the unemployment rate in the United States remains stubbornly high and this will affect Bay Area job growth," he said.
Despite those warning flags, Levine of Beacon Economics remains bullish on Bay Area job growth because of its powerful tech sector.
"The prospects for the Bay Area are still good," Levine said. "Companies have a drive for productivity and efficiency that will not go away. And that means technology products and systems to make companies more efficient will remain in demand."
Contact George Avalos at 408-373-3556 or 925-977-8477. Follow him at Twitter.com/george_avalos.