Tag: research

San Diego’s economic recovery must be inclusive.

By Julian Parra,

A note from Our board chair

In 1967, my parents fled Cuba to seek freedom and a better life in the United States. Due to travel restrictions, they were forced to move to Spain, where I was born, before finally arriving in the City of Chicago in January 1968. My parents never dreamed that within a generation, their son would become a senior executive at one of the largest financial institutions in the world. Growing up in the Rogers Park neighborhood of Chicago, I certainly never thought that the community I would find myself living and investing in all these years later would be San Diego, California. Yet here I am.

As I take on the role of board chair for the next two years at San Diego Regional EDC, I am fortunate, blessed, and humbled by the opportunities that life has given me. I also recognize that my story is not the norm for Latino immigrants in this country and that my journey thus far is not particularly common for a city kid from Chicago. I feel both an obligation and responsibility to use this time at EDC wisely, effectively, and purposefully. And as the threats and realities of COVID-19 and racial injustice continue to grip our community and our economy, like many, I feel the urgency and the need to accelerate the recovery that lies in front of us.

From the years following the Great Depression to those following the Great Recession, every recovery that the American economy has experienced has increased systemic poverty and widened the inequalities in Latino and African American communities. Too often, in a rush to restore economic normalcy for some, entire segments of our communities have been left further behind and unable to find and maintain their footing on a new and changing economic foundation. Our commitment at EDC is to do everything we can—drawing on the breadth and depth of every partnership and relationship we have—to get this recovery right.

This recovery requires us to redouble our commitment to inclusive economic growth, so that we build back a San Diego that is more resilient because prosperity reaches more people. Even in the midst of great economic uncertainty, we know one thing for sure: the innovation economy will lead us out of this recession just like it has every one before it. If the business community is thoughtful, strategic, and collaborative in this moment, we can ensure a stronger, bolder, more resilient San Diego in the years ahead.

The building blocks are clear: skilled talent, quality jobs, and thriving households.

  1. The hottest job market in a generation has become the weakest. However, there are still shortages for in-demand jobs. This means we need to do better at equipping San Diegans for the jobs of today, and those of tomorrow.
  1. Nearly 30% of small businesses have closed. And we know small businesses employ the majority of San Diegans. This means we must invest in entrepreneurship and resiliency by creating opportunities for diverse founders, and better connecting small businesses to big customers.
  1. Housing prices and unemployment are both at record highs. The economy cannot recover if people cannot afford to live here. This means we must prioritize access to and affordability of the essential infrastructure that working families rely upon—like housing, childcare, and broadband.

If past economic, financial, education, and workforce decisions have exacerbated systemic poverty and created barriers to opportunity for so many, it follows that the decisions we make now can change the future for our children and grandchildren. And with nearly 200 of the region’s largest employers, hundreds of community partners, and the proud legacies of my family and culture behind me—I plan on seeing San Diego Regional EDC through a period of historic and inclusive growth. We will get this recovery right.

—Julian Parra, EDC board chair
& SVP, Region Executive, Pacific Southwest Business Banking, Bank of America

Visit our Inclusive SD page for more

See Julian’s op-ed in the San Diego Union-Tribune

Economy in crisis: Local housing market stays hot, unaffordable despite COVID

By Nate Kelley,

THE TAKEAWAYS…

  • House prices continued to climb locally, despite record job losses from COVID
  • Lower mortgage rates, strong population growth, the addition of high-earning newcomers to the region, and a razor-thin inventory of available houses have fueled house price growth
  • The evidence suggests that thousands of people are being priced out of San Diego each year, which could cause talent bottlenecks for local employers and drive labor costs higher
  • Building new housing will be crucial to making San Diego a more affordable place for people to live in the future

HOUSING STILL ON A TEAR

COVID-19 has done little, if anything, to cool down San Diego’s hot housing market. Depending on the source, the median home price in the region was up in July of this year anywhere from roughly 5% to more than 10% from a year prior. Meanwhile, rents are essentially flat to just slightly down over the past year even as personal income cratered an estimated 10.5% from February to April. Earnings have crawled back as job gains resumed in the summer months but still remain well below pre-COVID levels.

WHY HOUSING HASN’T FALTERED

So, how can the local housing market possibly support climbing prices and some of the highest rents in the country amid record unemployment? A combination of factors are at play, many of which are specific to San Diego.

First, falling mortgage rates lured more homebuyers into the market in the summer following an initial decline in April and May as the COVID outbreak worsened. Existing-home sales rebounded sharply in June and were up more than 10% from a year prior by July. Additional buyer interest drove prices higher.

Second, the pandemic disproportionately hurt workers in lower-paying fields while many workers in higher-paying industries shifted to remote work, allowing landlords and home sellers to charge prices at or near (or higher) than before the outbreak, especially for upper-tier properties.

Finally, San Diego boasts a national and international allure for high earners for its climate, lifestyle, and concentration of tech-related innovation jobs. More people have moved out of San Diego than moved here in recent years, but those moving in to the region tend to make about four times as much than those moving out, allowing home sellers and renters to keep prices elevated.

Therein lies the problem. Reframing the point above, it appears that residents are being forced out because they simply can’t afford to live here anymore, while the people moving in have secured employment in high-paying fields.

It’s important to note that net migration only measures people moving across county lines and doesn’t include organic population growth as people start families, people live to be older, etc. Overall, San Diego’s total population grew by more than 235,000 residents, or 7.6%, between 2010 and 2019—well above the 6.1% growth experienced nationwide. Housing supply has failed to keep up, and the result has been a steady climb in already-high housing prices locally.

THE REPERCUSSIONS

Housing affordability—measured as the ratio between earnings and median house prices—fell for all workers between February and July. This is in spite of the fact that higher-paid workers were, in most cases, able to continue working through the pandemic. However, housing affordability in San Diego is still farther from reach for lower-paid workers, underscoring the affordability issue faced for employees in fields outside of San Diego’s innovation economy, which includes tech and life sciences. Earnings for workers making less than the median salary of $73,596 per year dropped an estimated 19.5%, compared with a relatively less severe 7.3% decline for workers making above the median.

This creates an issue, since it limits the number of workers available in the region for fields outside of white-collar professions and may potentially create a talent bottleneck that could ultimately force labor costs higher. This is especially important for businesses operating within the tourism sector, including restaurants, bars, hotels, casinos, and retail shops already operating on tight margins that could have more difficulty absorbing rising labor costs than firms in other industries with greater pricing power.

Above-average population growth, above-average earnings for many employees, and a constricted housing inventory have created a perfect storm of unaffordable housing in San Diego. Expanding the supply of housing, as well as cultivating additional mass transit options—another topic in and of itself—will therefore be crucial to helping balance the market and ensuring San Diego retains its diverse talent pool.

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

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Economy in crisis: SD tourism holds up, but the recovery remains uneven

By Nate Kelley,

THE KEY TAKEAWAYS…

  • San Diego’s accommodation sector is performing well as summer draws to a close.
  • Hotels have been slow to rehire workers, but recent metrics suggest that a strong spate of hiring is in the cards.
  • The recovery has been uneven, but a number of industries have recouped most of the jobs lost to COVID-19.
  • A number of industries still have a long way to go, and many may never recover all of the jobs lost from COVID as businesses shift their business models.

SAN DIEGO TOURISM ON THE UPSWING

San Diego’s accommodation sector is holding its own despite another wave of COVID-related closures amid a spike in cases. Hotels in particular are closing out the summer on a high note, with the supply of rooms within striking distance of pre-COVID levels as of mid-August. The average daily rate (ADR) for rooms is climbing back somewhat more slowly but, at about $150 per night, is up some 67.4% from COVID lows in early May.

It took about a month, but as the COVID downturn intensified, accommodation employment tracked changes in room supply and average daily rates nearly one-for-one. That relationship would have suggested that accommodation employment should have grown by about 3,500 positions in July. Instead, employers only added back just 100 jobs, signaling caution on the part of hotels as the economy slowly climbs out of the crater left by the COVID-19 outbreak.

The caution within the industry makes sense. Laying off workers is painful for employers and employees alike, which is a likely reason why hotel employment didn’t falter until April and May, even though the impacts of COVID were felt as early as March. Similarly, instead of bringing workers back on just to have to let them go again in the event of another flare-up of the virus accompanied by additional closures, hotel managers may be taking a wait-and-see approach to rehiring. Nonetheless, recent industry performance suggests that hotels should be bringing about 8,000 to 8,500 workers back on to accommodate the increase in room supply and rates over the past couple of months once they feel it’s safe to do so.

As of the July employment report, accommodation employment rested at 17,800, up 43.4% from May’s low of 12,400 but still 43.3% below its pre-COVID peak of 31,400 in February. Given that expected hotel revenues—measured by the room supply multiplied by average daily rates—are just 16.5% below pre-COVID levels, employment should quickly follow. An increase of 8,000-plus employees would bring hotel employment more in line with expected foot traffic at hotels and would follow the trend seen so far during the downturn.

SAN DIEGO FACES AN UNEVEN RECOVERY

To say that the COVID downturn and subsequent recovery have been uneven across industries would be an understatement. The hotel industry’s improvement is encouraging, and a number of industries are at or near their pre-COVID employment levels, including: Heavy and civil engineering construction; building equipment contractors; computer and electronic product manufacturing; aerospace manufacturing; grocers; securities and commodities investment; and scientific research and development services.

However, total nonfarm employment in San Diego is still down 10.5% from February due in large part to slower rehiring in industries like restaurants and bars; personal services, such as dry cleaners and other laundry services as people work from home; and local government education, likely reflecting school jobs aside from teachers—like administrators, janitors, etc.—as the county waits to resume in-person teaching.

Unfortunately, many of these jobs will be slow to come back due to their face-to-face nature. What’s worse, many of those positions may not return at all. Even with the advent of a safe and effective vaccine, many businesses have changed their fundamental business models and have adopted new operational norms—like Twitter, who made working remote a permanent option for employees. As a result, the same positions required for those companies before the COVID outbreak may no longer be necessary to operate in the post-COVID world.

The impact of COVID has not only affected the lowest-paid among us in San Diego, but it has hurt communities of color the worst. Now, more than ever, targeted and effective solutions are needed to help these communities not just recover but thrive in the future. Reskilling and training of the workforce and offering equal access to capital for minority-owned businesses are not just ethical and moral necessities—they are economic ones, too. Because, we all do better when everyone is doing better; and a more resilient San Diego economy will help us all in the long-run.

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

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A legacy of discrimination: Redlining in San Diego

By Bree Burris,

Economic inequality is a pre-existing condition. And just like in the rest of the country, a history of housing discrimination and redlining policies has burdened San Diego with decades of mounting inequities that can still be seen and felt more than 80 years later.

Less than 20 miles apart, the 1938 redlining policy presented two vastly different lending practices that have shaped our socioeconomic reality decades later.

  • La Jolla: “Residents embrace nearly all types of professions and are all white. No threat of foreign infiltration. Homes are well maintained.”
  • Logan Heights: “Racial concentration of colored fraternity. Homes show only slight degree of pride of ownership and are on the average negligently maintained.”

Scroll over the map below to visualize how redlining policies set in 1938 still impact where people live and what they earn, today.

 

Today, San Diego is a majority-minority region, meaning no single race or ethnic group makes up more than 50% of the total population. It is a much larger, smarter, and more diverse region than it was 80 or 90 years ago, but we are still segregated. That is the legacy of deliberate investment in some parts of our county, and deliberate disinvestment in others. So, as we talk about getting this economic recovery right, we must address the ways in which communities of color and small businesses are most impacted.  It’s no coincidence the above map mirrors that of COVID-19 impacts.

Learn more about San Diego’s economic recovery

San Diego’s Economic Pulse: August 2020

By San Diego Regional EDC,

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Economic Pulse covers July 2020 and reflects some effects of the coronavirus pandemic on the labor market. Check out EDC’s research bureau for more data and stats about San Diego’s economy.

Unemployment Slightly Lower

The region’s unemployment rate was 12.3 percent in July down from a revised 13.8 percent in June 2020, and far above the year-ago estimate of 3.6 percent. Unemployment declined monthly as the region continues to reopen and jobs recover. The region’s unemployment rate remains lower than the state unemployment rate of 13.7 percent, but higher than the national unemployment rate of 10.5 percent.

Unemployment was highest in the unincorporated areas of Bostonia (21.8%), Bonita (18.0%), Spring Valley (16.7%), and in the cities of National City (16.5%) and El Cajon (16.4%). Unemployment was lowest in the cities of Solana Beach (6.9%), Poway (8.6%), Coronado (9.1%), and Del Mar (9.1%). Areas with large Hispanic populations are facing higher rates of unemployment, as Hispanics are disproportionally employed in the most vulnerable occupations.

Employment Continues to Decline

Total nonfarm employment fell in July, down 2,200 jobs. This differs from state and national data. In California, nonfarm employment increased by 15,370 in July from the month prior, while payroll employment increased by 1.8 million in the U.S. during the same time period.

Compared to a year ago, San Diego nonfarm employment remains down 144,400 jobs, or 10.2 percent. In California, total nonfarm employment is down 1.6 million jobs, or 8 percent compared to a year ago, while the U.S. is down nearly 13 million jobs, or 8.8 percent.

Sector Employment Split on Gains

Government accounted for the largest monthly losses, losing 12,800 jobs in July, primarily concentrated in local government education (down 13,200 jobs) and state government education (down 500 jobs). Compared to a year ago, local government education is down 8,300 jobs, and state government education is down 4,900 jobs. Local government education employment is largely women occupied (70 percent). Job losses in local and state government education have the potential to set back women in the workforce, a trend already exasperated by the pandemic according to a United Nations report.

Construction followed with a decline of 1,100 jobs. Construction of buildings declined both monthly and annually, which is especially important as the region continues to grapple with a housing affordability crisis. Without construction jobs, home building stops. Home price growth continues to outpace incomes, as housing production is about half the rate necessary to keep up with job and population growth. Ensuring San Diego is an attractive and affordable place for talent and business is critical to maintaining its regional competitiveness.

Trade, transportation, and utilities employment increased this month, adding 6,100 jobs. This was driven primarily by retail, which added 4,200 jobs. Clothing and clothing accessories stores grew by nearly 13 percent in July. As California clarified social distance retail guidelines, many retail stores were able to reopen, leading to an increase in employment.

The leisure and hospitality industry gained back 100 jobs in July, but remains down 60,800 jobs compared to a year ago. Nearly 40 percent of leisure and hospitality industry employees are Hispanic. These jobs are not likely to return in large numbers while social distancing remains in effect.

A Long Road to Recovery

Industry employment remains well below pre-pandemic levels seen in February 2020. The largest decline in employment has been the leisure and hospitality industry, down 49,500 jobs, or 25 percent. Government employment is down 30,200 jobs, educational and health services is down 20,300 jobs, and trade, transportation, and utilities, which includes retail, has lost 18,000 jobs since February.

While some jobs have been recovered, many will be lost permanently. Creative training programs to get these workers employed in growing occupations will be key to our economic recovery. Furthermore, the pandemic has exacerbated the inequities that have long-plagued the region, particularly our Hispanic population. Developing an economic recovery strategy that promotes inclusive growth is essential to ensuring our future economic competitiveness.

 

For more COVID-19 recovery resources and information, please visit this page.

EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

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San Diego’s Economic Pulse: July 2020

By San Diego Regional EDC,

Each month the California Employment Development Department (EDD) releases employment data for the prior month. This edition of San Diego’s Economic Pulse covers June 2020 and reflects some effects of the coronavirus pandemic on the labor market. Check out EDC’s research bureau for more data and stats about San Diego’s economy.

Unemployment Slightly Lower

The region’s unemployment rate was 13.9 percent in June down from a revised 15.2 percent in May 2020, and far above the year-ago estimate of 3.3 percent. The region’s unemployment rate remains lower than the state unemployment rate of 15.1 percent, but higher than the national unemployment rate of 11.2 percent during the same time period, respectively. Read more about EDC’s unemployment analysis.

Employment Continues to Recover

Between May 2020 and June 2020, total nonfarm employment in San Diego increased from a revised 1,301,700 to 1,355,700, a gain of 54,000 jobs. EDC’s COVID-19 survey of businesses shows that more than 60 percent of firms surveyed reduced their staff between March and May due to COVID19.The June employment numbers reflect jobs gradually returning to the region. This is consistent with state and national data. In California, nonfarm employment increased by 558,200 in June from the month prior, while payroll employment increased by 4.8 million in the U.S. during the same time period.

Compared to a year ago, San Diego nonfarm employment remains down 153,600 jobs or 10.2 percent. In California, total nonfarm employment is down 1.7 million jobs, or 10 percent compared to a year ago, while the U.S. is down nearly 13 million jobs, or 8.5 percent.

Sector Employment Slowly Returns

The leisure and hospitality industry accounted for the largest monthly gains, adding 34,700 jobs in June, primarily concentrated in food services and drinking places as restaurants reopened. While it is encouraging that the food services and drinking places sector has increased employment the last month, the industry still has 20 percent fewer jobs compared to a year ago. Tourism is still not close to recovered and likely will take much longer, the accommodation industry has 44 percent fewer jobs compared to a year ago.

Trade, transportation, and utilities employment increased this month, adding 9,500 jobs. This was driven primarily by retail, which added 6,800 jobs. Clothing and clothing accessories stores grew by nearly 49 percent in June. This aligns with national retail sales, which jumped 7.5 percent in June. The Census Bureau reported retail sales are 1.1 percent higher than their levels from a year ago, but those gains could be short-lived as infections begin to rise and closures continue.

Construction followed with an additional 4,100 positions, and educational and health services recovered 2,800 jobs lost between April and May. The bulk of job gains in educational and health services came from Ambulatory Health Care Services. The largest monthly employment decline was in government, with a loss of 3,900 jobs, as public finances continue to face revenue challenges.

Looking Ahead

While the employment report reveals solid monthly job gains, San Diego’s economy will likely face more job losses in the coming months. Just last week, the Governor announced more closures to retails and dining in. As industries close again, temporary layoffs are more likely to become permanent and the unemployment rate may rise again. Looking ahead, it is critical that workers have ample access to job training in order accelerate the economy’s recovery.

As educators plan for the upcoming school year, they are faced with unprecedented circumstances. San Diego Unified announced an online only fall learning plan, a first in the region. The lack of on-campus education will not only impact students and children with special needs, but also the working parents that depend on schools and daycare while at work. There are 180,000 households with two working adults and school-aged children. That means there are at least 360,000 workers in our region whose productivity or presence at work is being impacted while the virus remains a threat.

For more COVID-19 recovery resources and information, please visit this page.

EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

Request EDC assistance

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Economy in crisis: Another round of uncertainty

By Nate Kelley,

The takeaways

  • A solid U.S. jobs report suggests that, in June, San Diego may have recovered as many as 45,000 of the jobs lost to COVID, more than half of which are from leisure/hospitality and retail.
  • The San Diego jobs recovery lags the nation’s somewhat as local businesses reopened later than those in other parts of the country.
  • Persistently high continuing UI claims in California, fresh business closures, and a shift in unemployment from temporary to permanent significantly cloud the near-term outlook.

The Good…

The U.S. job market took another big step forward in June, adding a better than expected 4.8 million payroll jobs. Last month’s report indicates that, in May and June alone, the U.S. recouped roughly 40 percent of the jobs lost to COVID-19. For context, it took the nation 17 months during the Great Recession of 2007 to 2009 to recover 40 percent of the jobs lost during that downturn. In addition, the unemployment rate slid lower to 11.1 percent from 13.3 percent the month prior (although the topline figure alone is misleading—more to follow on that below).

While San Diego’s job market doesn’t necessarily mirror the nation’s, the U.S. employment report can still provide valuable information on what to expect locally in a given month. Looking at the historical relationship for employment in San Diego and the U.S., it’s possible that San Diego may have added back about 45,000 jobs in June, more than half of which could be attributed to leisure/hospitality and retail. Combined with May’s gain of 18,200 jobs, this would mean that roughly 30 to 35 percent of the jobs lost from COVID will have been recovered. The slower pace of recovery compared with the U.S. as a whole can be partly explained by local retailers and restaurants reopening later here than in some other parts of the country.

If history is a guide, then the U.S. job numbers would imply an additional 18,000 to 20,000 leisure/hospitality positions, which would add up to roughly 20 percent of the jobs lost from February to April. In addition, the national figures imply a local recovery of between 7,000 and 8,000 retail positions, or about one in three jobs lost to COVID.

The addition of 7,000 to 8,000 retail jobs in June is slightly higher than our analysis of employment gains due to a rebound in U.S. retail sales that suggested San Diego retailers would add back closer to 6,000 to 6,500 jobs in June. However, the way by which national retail sales figures are averaged would have meant that the number of recovered local jobs could certainly be higher, making the estimate for 7,000 to 8,000 reclaimed positions not implausible.

…The Bad, and the (potentially) ugly

Unfortunately, other data points and recent events significantly cloud the near-term outlook.

Continuing claims for unemployment insurance in California, which are closely correlated to San Diego unemployment, have remained stubbornly high, increasing from an average of 2.83 million in May to 2.89 million in June. On its own, this would suggest a slight increase in the local unemployment rate from 15 percent in May to 15.2 percent in June.

In addition, state, county, and city officials have rolled back reopenings for bars, indoor restaurants, theaters, tasting rooms, and museums until the end of July, which could mean another round of layoffs will show up in the July employment report. The share of people testing positive for COVID-19 has increased from two to three percent for most of May and early June to six to seven percent. Moreover, the number of community outbreaks has reached double-digits in recent weeks, and the county reported more than 1,000 new cases over the Fourth of July weekend alone, prompting the closures.

Finally, despite the drop in the topline U.S. unemployment rate in June, the number of people whose unemployment shifted from temporary to permanent increased by nearly 600,000, bringing the number of permanently laid off workers to a six-year high. If a similar trend takes hold in San Diego, then the jobs recovery could take longer, because permanently laid off workers are more likely to become discouraged, drop out of the labor force, and lose valuable skills, making them significantly less likely to re-enter the job market. As such, it is crucial that these workers have ample access to job training to enhance their skills, keep them engaged, and increase the chances that the coming recovery leads to a more inclusive and resilient San Diego economy going forward.

Taken together, the June employment report—due out July 17—will almost certainly reveal solid monthly job gains. However, other indicators suggest that the labor market is unlikely to enjoy a smooth upward trajectory from here on out. The coming recovery is bound to be rife with bumps, hiccups, twists, and turns this year into next.

For more COVID-19 recovery resources and information, please visit this page.

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

Request EDC assistance

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The economic impact of COVID-19 in San Diego

By Eduardo Velasquez,

San Diego Regional EDC has partnered with the Downtown San Diego Partnership, National City Chamber of Commerce, San Diego and Imperial SBDC, and San Diego Regional Chamber of Commerce on a study to assess the impacts of COVID-19 on San Diego’s economy.

UNDERSTANDING THE RESULTS

Select an industry, firm size, revenue, and date range below to learn more about company’s responses below.

 

Read the weekly analysis:

 

 

COVID-19 Survey Results: Anticipated impacts become reality, minority owned businesses hit hard, and workspace changes will continue

By Jordan Latchford,

Earlier this year, we deployed a survey to assess the immediate economic impacts and evolving business sentiment in the wake of COVID-19.

To assess changes over time, we have deployed a follow-up survey with our partners at San Diego Regional Chamber of Commerce, San Diego and Imperial Small Business Development Center. The Downtown San Diego Partnership and National City Chamber of Commerce also served as survey partners. Information collected was from May 28 – June 8 and includes 194 valid responses.

Three trends stood out based on what employers told us:

  1. Anticipated revenue declines and staff reductions confirmed by businesses; 41 percent of businesses surveyed saw revenues decline by 81 to 100%, 93 percent saw  staffing declines of one to 50 employees.
  1. Minority owned businesses are hardest hit but may lead recovery. Long term, minority owned businesses anticipate continuing workspace changes (56 percent), teleworking (41 percent), offering online services (34 percent), and virtual programming and team building.
  1. Telework is here to stay, with 47 percent of firm surveyed reporting workspace changes to continue after the state of emergency is over.

Understanding COVID-19’s impact: an interactive visualization

Below is an interactive visualization of self-reported impacts to local employers, both in terms of employment and revenue. You can segment the data by industry, number of employees, and typical annual revenue. Additionally, please scroll over the tab to look at the breakdown of responses via zip code. Please note, this is not a representative sample – meaning we did not weigh responses operationally to the population and demographics of the region – so we strongly advise against drawing sub-regional conclusions from this data.

Survey Overview

The economic impacts of this crisis disproportionately affect the parts of our community that are disconnected from growth: communities of color and small businesses. The right recovery means focusing on efforts that benefit all San Diegans in this unique moment in time.

The overwhelming majority of firms surveyed (93 percent) were small businesses (fewer than 100 employees) and most (73 percent) had revenues of less than $1 million in 2019. Survey respondents were concentrated in the food and beverage, professional services, manufacturing, and retail industries.

Nearly 93 percent of firms surveyed saw their revenue decline, with most (41 percent) declining by 81 to 100 percent. However, more than one third expect revenues to return to 2019 levels in six to 12 months. The majority cut back on payrolls, with nearly 74 percent reducing staff hours and 60 percent reducing staff. The food and beverage industry had the most (19 percent) full time layoffs, followed by professional services (17 percent). Overall, most firms in all industries expect layoffs to be temporary, but 32 percent are still unsure. The uncertainty might be due to growing concern that the economy will fully reopen within the coming summer months, but a second wave in the fall will turn temporary layoffs into permanent ones.

Nearly 87 percent of firms surveyed applied for government (federal, state, or city) or private (company grants or bank loans) funding, and 70 percent who applied received funding. Firms that received private (company grants or bank loans) funding received more than $260,000 on average and firms that received government funding received more than $245,000 on average

Firms located in the opportunity zone represent 12 percent of survey respondents, or 24 businesses. In terms of access to capital, nearly 63 percent of firms located in an Opportunity Zone cited access to capital as a long term need in response to COVID-19, while 43 percent of all survey respondents cited access to capital as a long term need.

When asked about the changes a firm has experienced as a result of the pandemic, the top response was “scope of work”, which indicates firms are adjusting their business models and changing the range in which they operate in response to COVID-19. Unsurprisingly, in the short-term, businesses’ greatest needs are increased revenues and additional capital. While many businesses are unsure of the longer-term impact, they still anticipate needing capital and replacing staff.

Anticipated Revenue Declines and Staffing Reductions Confirmed

Most anticipated revenue impacts in the beginning of the COVID-19 pandemic were realized, even as reopening continues across San Diego County. More than 95 percent of businesses surveyed that expected their revenue to decline saw an actual decline in their revenue. Nearly 97 percent of businesses that expected their revenue to decline by 81 to 100 percent saw an actual decline of that amount.

Most anticipated staffing impacts in the beginning of COVID-19 pandemic were realized as well. More than 73 percent of firms surveyed who anticipated staff reductions actually reduced their staff. Most staff reductions were between 1 and 50 employees. More than 78 percent of those that anticipated staff reductions of one to 50 employees actually saw these reductions.

Minority-Owned Businesses

A new report shows that because minority owned small businesses have been disproportionately impacted by COVID, they may demonstrate how US businesses will ultimately adapt. These businesses are experimenting with new ways of working to ensure their employees’ safety, offering relief to employees and community members, and introducing new services. In San Diego, the top adjustments minority owned businesses made in response to the pandemic that are working well are workspace changes (56 percent), teleworking (41 percent), offering online services (34 percent), and virtual programming and team building.

There were 44 minority owned businesses that responded to the survey. Nearly all (98 percent) of minority owned businesses surveyed were small businesses with fewer than 100 employees. These businesses are concentrated in professional services, food and beverage, manufacturing, and retail – the industries hardest hit by COVID-19. The latest employment data shows that from February to June 2020, local retail, food and beverage, and professional services lost a combined 86,200 jobs. More than 90 percent of minority owned businesses have seen their revenue decline, with most experiencing steep revenue declines of 81 to 100 percent.

Workspace Future

In order to keep operating, many businesses have made changes to their physical workspace and/or are have employees working remotely. Firms surveyed expect to maintain these arrangements even after the state of emergency is lifted. Nearly 76 percent of firms surveyed report physical space as critical for operation, with most of those businesses in food and beverage, professional services, and manufacturing. Only seven percent of firms reported the pandemic has shown them that office space is unnecessary. Firms were split in regards to whether physical workspace will decrease, increase, or remain the same in the future.

Resources for you

San Diego Regional EDC, San Diego Regional Chamber of Commerce, and San Diego and Imperial SBDC offer a variety of resources to help businesses.

If you would like assistance from EDC, please use this form. Once we receive your responses, we will make every effort to reach out to you within 24 hours.

Request EDC assistance

Economy in Crisis: Retail likely to rebound in June

By Nate Kelley,

San Diego’s May employment report roundly beat expectations. Against all odds, the region recovered 18,200 jobs lost during COVID-19. While this represents less than 10 percent of the 223,700 payrolls lost from February to April 2020, it’s still a promising sign that the local job market has turned the corner. Eating and drinking establishments, ambulatory healthcare, and construction each saw impressive rebounds in May 2020. Conspicuously absent from last month’s turnaround, however, was retail.

Clothing stores alone have accounted for more than a third of all retail-based layoffs, and nearly two in every three clothing store workers were let go from February to May. That is even more severe than the losses suffered by restaurants and bars, which cut nearly half of their staffs during the COVID outbreak.

Since February, retail jobs lost have totaled 24,000, with 300 workers let go in May. While May’s retail job losses aren’t alarming in the context of COVID, it indicates that the industry is yet to initiate a recovery.

GREEN SHOOTS

Nascent signs are emerging that retail’s long-awaited rebound moment has come. Locally, many shops reopened their doors to customers in June with modified social distancing protocols in place. This is similar to other parts of the country last month, leading to May’s record 17.7 percent jump in U.S. retail sales. Now that San Diego retailers have also reopened, it’s not unreasonable to assume a bounce back similar to May’s national retail sales figure could emerge locally in June.

An impact analysis that links local retail sales to employment suggests that if the same trends in the U.S. retail sales report were to play out here, we could expect a little more than 6,000 of the 24,000 retail jobs lost between February and May to be recovered in June alone. Sales at U.S. clothing stores rebounded an astonishing 188 percent in May. A similar spike in sales receipts in San Diego would be consistent with a June recovery of roughly 3,000—or two in five—of the 8,200 jobs lost at clothing stores from February to May. That is even more impressive than May’s 15 percent jobs rebound at eating and drinking establishments, and would bring the retail recovery more in line with other industries after a false start of sorts last month.

While this analysis is in line with the broader national trend, there are several caveats to consider.

First, the above only looks at one data point, which is a national sales report that may not reflect all of the idiosyncrasies of the San Diego retail industry. Additional data in the coming weeks, including June’s U.S. jobs report, will allow us to refine the estimates above.

Second, the 17.7 percent jump in U.S. retail sales reflects a weighted average of different—and potentially conflicting—regional trends. In other words, May’s rebound in retail sales may have been even stronger in newly reopened parts of the country than the topline figure of 17.7 percent would suggest. That is because the sales bump in those regions would have had to more than make up for steady or falling sales in other states like New York and California that hadn’t yet fully reopened.

Finally, any recovery could prove to be a false positive if thresholds are triggered that cause local, county, or state officials to pause or even walk back reopening.

Taken together, barring a spike in COVID cases, it looks like retail will finally join in the recovery. June’s employment report, which is due to be released on July 17, should ultimately confirm this. We’ll be reporting back on the health of retail and other industries as more data become available.

For more COVID-19 recovery resources and information, please visit this page.

Regardless of how this all plays out, EDC is here to help. You can use the button below to request our assistance with finding information, applying to relief programs, and more.

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