Only two sectors reported negative year-over-year employment growth in December

One sector was expected, the other wasn’t

Last December (2020) was not exactly a high point for the economy, but it was better than 8 months prior, in April 2020. And as we moved into 2021, the economy continued to grow. By the end of 2021, most sectors were in a much better position than they were at the end of 2020.

Yes, most sectors were in a better position, but not all. According to the latest BLS data for the Inland Empire, employment in Construction and Government (public sector) dropped between December 2020 and December 2021. Construction dropped 2.9% and public sector employment dropped 0.2%.

The decline in construction was mostly expected due to two reasons: weather and regional factors. It was especially rainy in December, which likely slowed construction projects down. As Beacon Economics’s seasonally adjusted numbers reveal, even after accounting for normal seasonal factors, construction employment still dipped 2.8% year-over-year in December (and -1.3% month-to-month), suggesting the exceptional weather had something to do with the decline. Regarding regional factors, we’ve seen a slowdown in new housing starts in the Western region over the last few months. While housing starts were up 1.4% nationally in November (seasonally adjusted), they were down 15% (again, seasonally adjusted) in the Western region.

The decline in public sector employment in the Inland Empire, which is completely related to K-12 education, continues to surprise economists and policymakers. Public sector employment, in December 2021, was lower than it was in December 2020. Not just December 2021 either – you can say the same thing about November 2020 vs. November 2021, October 2020 vs. October 2021, and even September 2020 (when most schools were locked down!) vs. September 2021 (when most schools were back to in-person). So the -0.2% rate is certainly not a blip on the radar, but is rather a real trend.

This graph indexes public sector employment in the San Diego, LA, and Inland Empire metro areas to 100 in March 2020. A reading of 96 in December 2021 for San Diego means that public sector employment is down 4% relative to pre-pandemic. In LA, it’s down about 5%, and in the IE, it’s down about 9%. As you can see, in San Diego and LA, things have improved somewhat over the last year, whereas that same improvement pattern is absent in the IE.

That is certainly major news and fits with what I’ve written about recently regarding public sector employment. And unfortunately, I am not sure what it will take for this part of the economy to rebound at this point.