Region's job loss is first since '80s

By: CHRIS BAGLEY - Staff Writer | Friday, February 29, 2008 11:15 PM PST ∞

More than 14,000 private-sector jobs disappeared from Riverside and San Bernardino counties last year as the effects of sinking home prices and increasing foreclosures spread to retail and other sectors of the region's economy, a state agency reported Friday.

The region's economy contracted to about 1.27 million jobs in January from 1.28 million a year earlier, marking the first 12-month period since the 1980s when it has shed jobs, according to the California Employment Development Department. Government agencies added 6,800 jobs in the two counties over the course of the year, offsetting about half of the private sector's losses.

The region's unemployment rate ballooned to 6.7 percent from 5.4 percent in January 2007.

The regional economy's historic surge began in 2001, when rock-bottom mortgage rates sparked a boom in real estate markets and home construction. With an eye on the lower housing costs and low gasoline prices, commuters filled bedroom communities that had been considered too remote for commuting.

Murrieta's population, for example, doubled in five years, to 93,500 in 2006, according to state estimates based on census data and housing permits. Shopping centers and restaurants have sprung up to serve the new residents.

But the red-hot market for single-family homes chilled during 2005-06, and when home prices began to decline, many new homeowners found themselves with too little home equity to sell or refinance themselves out of trouble. Several thousand families in Southwest County have lost their houses, and many others, newly cautious, have cut back on their spending.

The construction industry has shed about 8,700 jobs in the two-county region in the last year, according to the report Friday. Retailers have cut about 4,000 jobs; mortgage brokers and other financial-services companies have cut about 3,000.

"This surprises me not at all," regional economist John Husing said in an interview. "The slowdown of housing is affecting the economy."

The state agency's new report is considered more accurate than its monthly reports over the last 11 months because its annually revised methodology includes tax data from businesses. It showed the state added only 14,900 payroll jobs in the 12-month period ended Jan. 31, a paltry 0.1 percent increase. California's unemployment rate rose to 5.9 percent, up from 5 percent in January 2007.

"These revisions, while not unexpected, highlight the probability that economic growth in 2008 will be lower than expected, which in turn will intensify the pressures on state and local budgets," Stephen Levy, director of the Center for Continuing Study of the California Economy, wrote in a research brief.

Jason van Eik, vice president of the Tristaff employment agency in Temecula, said business is as good as it ever was for 60 percent of his clients. But the other 40 percent are requesting fewer workers than in 2005 and 2006, or no workers at all. It's been particularly tough with companies tied to the real estate and construction industries, he said.

"It affects everything," van Eik said of the housing market. "The trickle-down effect affects all of them."

The manufacturing sector also shrank slightly last year in the region. Abbott Laboratories, which makes medical catheters and stents at its factory on Ynez Road, laid off about 700 people, or 15 percent of its work force, in December.

Van Eik said he fully expects Abbott to hire at least that many people over the next two years as it completes and then fills its two new buildings across Ynez. Workers with skills in bookkeeping, computer technology and a range of other growing fields, are still in high demand, he said.

"They're still making money," van Eik said.

The Associated Press contributed to this report. Contact staff writer Chris Bagley at (951) 676-4315, Ext. 5444 or cbagley@californian.com. Comment at www.californian.com.

A homebuilding boom created tens of thousands of jobs in Southwest County and nearby areas from 2001-05. Growth in retail and other industries followed. But unemployment has been rising as foreclosures increase and residents cut back their spending. This chart shows year-on-year growth in payroll employment for the last five Januaries in the two-county region of Riverside and San Bernardino and in San Diego County.

2004 2005 2006 2007 2008

Riverside/ 4.2% 5.3% 5.1% 1.2% -0.6%

San Bernardino

San Diego 1.1% 1.7% 1.7% 0.8% 0.4%

Source: California Employment Development Department