San Diego Innovation Hubs Lead Wage Growth

San Diego is among the top markets for wage growth in the nation, thanks in large part to the market’s innovation hubs. According to research from JLL, the market is ranked fifth in the nation for year-over-year wage growth, which came in at 3.6% in Q3 2019. San Diego is tied with Cleveland for the fifth place position, and San Francisco, Seattle, Austin and Pittsburgh round out the top five list.

“San Diego is seeing one of the tightest labor markets in nearly 20-years,” Pat Ashton, senior marketing analyst at JLL, tells GlobeSt.com. “Current unemployment is at 2.8%; this is the second consecutive month where the unemployment rate is under 3%, and the third time the rate has been under 3% this year. The last time this has occurred was back in 1999.”

The labor market is actually on track to improve even more through the end of the year. “The way things are going and with the holiday season upon us, I wouldn’t be surprised if November and December unemployment rates dip even lower; marking the first time the San Diego has had four consecutive months of unemployment under 3%,” says Ashton. “A tight labor market coupled with innovative companies increasing their footprint is forcing companies to raise their wages to recruit and retain top talent. VC funding and government funding has been healthy for technology, life sciences, and defense companies, ultimately helping them grow and pay their skilled employees.”

Companies are waging wages to both attract and recruit talent, triggering the low unemployment environment. The trend has also had a significant impact on the local economy. “We are seeing wage growth impact the local economy in a variety of different ways with consumer confidence, first time homebuyers, and people being able to start families,” says Ashton. “Now with a tight labor market and a highly talented labor pool, this is forcing wages to increase allowing the younger generation to afford homes.”

Housing affordability is the biggest benefit of increased wages. Combined with low interest rates, the housing market in San Diego is healthy. “Increased wages and near-record low-interest rates have paved the way for first time home buyers,” says Ashton. “According to Forbes and Zillow, both San Diego and Boston are anticipated to see a large increase in first time homebuyers for people in their 30’s in the next few years. Both markets are seeing strong growth in the innovation sectors, especially with technology and the life sciences that pay skilled workers to develop groundbreaking discoveries.”