.Santa Cruz’s Economy On The Rebound

The county’s 2023 State of the Workforce report also shows that housing and low-wage stagnation is still a problem

The local economy is showing promising signs of recovery according to the 2023 State of the Workforce report released last week. Published by the Santa Cruz County Workforce Development Board, the report paints the picture of a strong rebound overall in the wake of the COVID-19 pandemic.

“The local economy is experiencing a fairly robust recovery from the COVID-19 pandemic,” said Workforce Development Board Director Andy Stone. “However, the high cost of living and a severe housing crisis continue to make it difficult for local employers to attract and retain workers.” 

From 2017 to 2022, the county experienced a 9% increase in jobs, adding 9,100 new positions. This is markedly higher than the state and national average, which come in at 4% and 3%. 

The report emphasizes that the recent job additions are mainly concentrated in high-paying industries such as defense, aerospace, transportation and manufacturing (DATM) which grew by a dramatic 222% within this timeframe. This high-earning cluster has an annual average earning of about $142,000 per year.

Joby Aviation is highlighted in the recap as a business case study in the DATM industry. The company has contributed to the rise of high-earning jobs in the area. 

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However, gains in some areas like high-skill employment are countered by issues like the lack of affordable housing and a higher unemployment rate than the national average.

Breaking Down Numbers

Despite the promising outlook for high-earners, the overall job quality in Santa Cruz County is lower than the state average. Low-pay workers at jobs like in the retail and food service industries make up 57.5% of jobs in the county compared to 53.1% statewide. 

Max Halterman has seen what these numbers mean in real life. 

Halterman is one of the founders of Om Gallery, an eclectic home goods store in the heart of downtown Santa Cruz established in 2001. His business requires a mix of part-time retail workers and management positions. He’s been having a hard time retaining talent for management positions.

“The relatively low wage that we’re able to offer because we’re a small business is just kind of illustrating [that] we don’t have the business capabilities to pay Silicon Valley professional wages but the cost of living here requires it,” said Halterman.

The report notes that in the county, 45% of renters—around 17,000 residents—spend 35% or more of their income on housing. 

Santa Cruz County residents with low-earning jobs are in a precarious situation in an area where the market rate for a two-bedroom apartment is $3,293 according to the National Low Income Housing Coalition’s Out of Reach report. Residents here may need to look elsewhere for a place they can comfortably afford.

Unlike many small businesses, Om Gallery survived the COVID-19 pandemic, said Halterman. Despite current inflation fears affecting consumer spending, Halterman has also seen an upturn since the pandemic. 

“The first 12 to 16 months after COVID there was a real strong recovery for us. Sales increased greatly even to pre-pandemic levels,” he said. 

Remote Work

Between 2020 and 2021, a sharp decrease in population saw 4,800 residents leave the county, following a statewide trend. During the same period 277,000 Californians left the state citing housing costs as the main factor. Santa Cruz County residents point to housing costs and remote work as factors for them.

The number of remote workers in northern parts of the county nearly doubled to 91%, according to the report. The southern part of the county also saw an increase, with 44% of workers going remote since 2017.

If seen at a glance, the increase in high-earning jobs props up employment statistics. However, at 6.7%, the unemployment rate in Santa Cruz County is higher than the state average of 4.8% and the national average of 3.9%. Labor force participation also declined from 62% in 2019 to 59% in 2021, not having fully recovered from its pre-pandemic numbers.

Looking Ahead

Another source of potential job creation is a county infrastructure investment that allocated $119 million for the 2022-23 fiscal year budget. The substantial 223% increase for road repairs and improvements may add hundreds or thousands of jobs, says the report. An additional $7 million has also been set aside for housing projects.

The infrastructure workforce is aging, however, with 23% of overall transportation workers being 55 or older and close to retirement. The residential construction workforce is in similar shape, with 26% of workers there being over the age of 55.

County vocational training programs are crucial to bringing new blood into the workforce. Cabrillo College (42%) and local union chapters (39%) offer the most vocational training relevant to infrastructure and residential construction in Santa Cruz County, according to the report.

There is plenty of good news in the WDB breakdown, but the high cost of living is a key factor contributing to Santa Cruz County’s inability to retain workers of various skill levels.

“Business-owners continue to struggle to find qualified applicants for skilled and unskilled work due to the high costs of living and lower wages offered than in neighboring regions,” the report states.

The full State of the Workforce report can be found here.

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