Blogging on Employment and Job Markets in US Metro Areas

West Coast Metro Areas – Employment Growth and Housing

Up and down the West Coast, recent conversations about housing usually include the word “crisis”, as a few Google searches will attest. During the current expansion, the supply of new housing has not kept pace with employment growth, which drives demand for housing.

In a recent post, I compared nonfarm payroll (NFP) employment growth to housing permits issued over the 2011 to 2016 period for 51 large US metro areas (those that had populations of 1 million or more as of the 2010 census). This post will focus on just West Coast metro areas. The table below shows housing and employment figures for eight West Coast metro areas, and can be sorted by any column. The right-most column is the ratio of housing units per increase in employment, referred to as the “H/E ratio”, introduced in a previous post.

West Coast Metro Areas – 2011 to 2016 Housing Permits and Employment Growth

Metro Area2011-2016 NFP
2011-2016 NFP
% of units
housing units
per NFP
Portland, OR163.12.6%65,77449.4%0.40
Seattle-Tacoma, WA299.32.8%120,89059.0%0.40
San Diego, CA184.02.3%46,72767.8%0.25
Sacramento, CA127.32.4%27,64815.8%0.22
Inland Empire, CA262.13.4%50,14425.6%0.19
San Jose, CA219.03.8%38,34573.4%0.18
San Francisco, CA405.83.2%64,24465.6%0.16
Los Angeles, CA667.02.0%92,99272.0%0.14
data source: Bureau of Labor Statistics, Census Bureau

For these eight West Coast metro areas employment growth has been relatively strong over the 2011 to 2016 period with a CAGR (compound annual growth rate) that ranges from 2.0% for LA to 3.8% for San Jose. By comparison the national rate was 1.8%.

The Seattle-Tacoma and Portland metro areas both have H/E ratios of 0.40 (above the national large metro average of 0.34), while the California metro areas’ H/E ratios are significantly lower, ranging from 0.25 for San Diego, to 0.14 for LA. In short, relative to employment growth, Seattle and Portland have issued considerably more housing permits than the large California metro areas.

West Coast metro areas H/E ratio - housing units per employment increase

Repeating the caveat from my earlier posts on this subject: the H/E ratio tells us only about the incremental supply of housing units to be added, and incremental demand as gauged by increases in employment, and does not tell us anything about the existing housing stock or the existing employment base. That is, it does not give us the entire picture of supply and demand for housing.