San Diego’s post pandemic economic recovery bogged down by lingering worker shortages

San Diego’s economic rebound from the COVID-19 pandemic remained sluggish in June, bogged down by lingering worker shortages as people take their time before returning to the workforce.

The unadjusted unemployment rate for San Diego County ticked up to 7 percent in June from 6.3 percent in May, according to data released Friday from the state Economic Development Department.

That’s not unusual. Jobless rates tend to rise in early summer as students enter the labor force during the school break and local government hiring slows.

But since pandemic restrictions eased and businesses reopened, hiring gains locally have been slower than many expected — despite rising wages and perks aimed at luring back workers.

In June 2019 before pandemic lockdowns, San Diego County’s unemployment rate was just 3.4 percent.

“We have two problems. The unemployment rate is still not back down to 3 percent, and there are a lot of people out of the labor force,” said Lynn Reaser, chief economist at the Fermanian Business & Economic Institute at Point Loma Nazarene University.

Last month there were roughly 46,000 fewer workers in San Diego County’s civilian labor force than there were in June 2019, according to Employment Development Department data.

At mid-year, San Diego jobs were about 92 percent of pre-pandemic highs reached in February 2020. That trails both California, at 93 percent, and the U.S., at 95.5 percent.

“San Diego’s third position behind California and the nation is a concern,” said Reaser. “Given our strengths supported by the military, biotech, tourism, electronics and professional services, we should be doing better.”

Tourism has been among the slowest sectors to make employment gains. Leisure and hospitality employment in June was just 79 percent of levels prior to the pandemic.

Hotel employment alone is at 20-year low — despite there being more hotel rooms in the region today, said Kelly Cunningham, economist at the San Diego Institute for Economic Research.

“Even though they have added jobs over last year, they are still way below where they were even 20 years ago for hotel jobs in San Diego in the summertime,” he said. “Restaurant numbers are the lowest since 2013. Clearly, the visitor industry has a long way to go.”

Several other industries also have yet to return to pre-pandemic employment. Retail jobs are roughly at 2013 levels, said Cunningham. But construction and utility employment has reached pre-pandemic highs.

In total, county employers added a net 5,700 jobs in June over May. Many businesses say they would have hired more workers if they could find them.

“The problem is not on the demand side, as consumers have money they want to spend,” said Reaser. “It is on the supply side, with companies struggling to find parts and even more importantly, workers.”

Enhanced federal unemployment benefits that extend into September, coupled with a beefed-up federal child tax credit and $600 California stimulus checks for low- and moderate-income households expected this fall, are seen in some circles as discouraging people from returning to work.

“The safety net has been an issue for some,” said Reaser. “Some of it has been related to child care. Workers are taking longer to access their opportunities. At the same time, there are a lot of people who are on the sidelines. They’re not yet back in the workforce.”

As a result of the worker shortage, pay rates have gone up 10 percent to 30 percent in the past three months alone, said Phil Blair, executive officer of employment agency Manpower West. Jobs that used to start at $15 an hour are now paying $18.

“Employers are raising wages, offering hiring incentives and offering training to applicants with no experience,” said Blair. “Many San Diegans are ready to go back to work. We could use even more.”

Pechanga Resort Casino is looking to fill 250 open positions at a job fair slated for July 21 — with several of the jobs coming with signing bonuses.

A lifeguard position, for example, will fetch an extra $500. Guest room attendants and stewards earn $1,000. And newly hired, full-time line cooks will take home a $1,500 bonus.

Employment agency Robert Half recently conducted a survey of employer hiring plans in 28 cities. San Diego was the top job market, with 62 percent of local companies planning to add new permanent positions this year.

Besides signing bonuses, employers are offering more paid time off and better job titles, according to the survey. They’re also loosening requirements around years of experience and education levels for hard-to-fill positions.

“Job seekers are becoming more discerning when evaluating opportunities,” said Paul McDonald, senior executive director of Robert Half. “Employers need to exceed candidates’ expectations or risk losing them to better offers.”