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  • Workforce Development Board Commentary: 2.9% Unemployment Rate in Santa Barbara County

    With Friday's Labor Market Information press release by the State of California (link to SBCWDB Bulletin below) of 2.9% unemployment in Santa Barbara County for May 2019, it may have stirred up some questions. This 2.9 % unemployment rate is the lowest Santa Barbara County has ever experienced.
     

    With the above in mind, I’ve compiled some observations that may add context and speak to the ramifications of this extremely low unemployment rate. 
     
    First off, in reviewing the State’s Unemployment and Jobs numbers it’s important to remember that the State defines unemployment via a calculation of people who are jobless and have actively looked for work in the past four weeks, consistent with the U.S. Bureau of Labor Statistics (BLS) methodology. If an individual stops looking for work, the BLS methodology does not count them in the unemployment rate. 
     
    Moreover, there are several factors that can affect the unemployment numbers, positively or negatively:
    Voluntarily Leaving the Workforce: individuals may have enough money saved or decided to return to school full-time, and have therefore stopped looking. This will lower the unemployment rate. 
    Relocation: former county residents may have decided to look for a job in another city. This will lower the unemployment rate. 
    New Workers Entering the Workforce: students who graduated, and join the workforce will increase the unemployment rate. 
    Job Seekers Re-Entering the Workforce: some individuals re-enter the job market after having a child, or caring for aging parents/ill relative. This will increase the unemployment rate. 
    Advances in Technology: robotics or computer technology can result in the replacement of employees. This will increase the unemployment rate. 
    Job Outsourcing: due to local labor costs businesses may choose to outsource major parts of their operation to other states or countries. This will increase the unemployment rate. 
     
    Low unemployment may affect the local economy in the following ways:
     
    Productivity: if low unemployment is because businesses have an adequate supply of workers, it may put pressure on employees to perform at peak levels in order to not lose their job—because there are few “outside” opportunities. 
    Increased Incumbent Job Opportunities: the opposite of the first bullet. Low unemployment may mean that there are few suitable unemployed job seekers. As a result, employers may increase investment in their existing workforce—providing training in new skills/technology to accomplish more with fewer employees. This is the Ideal Workforce Situation; and is a win/win for employers & employees alike. Incumbent Worker strategies is something the Workforce Development Board can help businesses accomplish.
    Higher Consumer Spending: most economists believe spending increases when people are working and therefore it also benefits the overall local economy, via increased sales and tax revenue.
     
    Finally, in looking at the hard data, the industry sectors listed below had the largest growth since 2010 in Santa Barbara County, and therefore could have contributed to the low unemployment/high employment rates. It should be noted that with the exception of “Educational & Health Services,” the jobs in these sectors are mainly “low-pay/low-skill” jobs: 
     
    Leisure & Hospitality
    Farm
    Educational & Health Services
     
    Labor Market Consultant, Andriy Moskalyk provided the County's Annual Average Unemployment Rate chart. You'll notice that since the beginning of 2010 we've experienced a steady decline. We can also see a trend occurring each year with January and February months unemployment peaks, May dips low, back up slightly in July, back down during the September and October months and the cycle continued. 

    We will know next month what the actual revised rate is for May so stayed tuned. The next Labor Market Information will be released on July 19.

    2019 May Labor Market Information Bulletin

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