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The Sacramento Area Economy Runs on Government

photo - Sacramento Tower Bridge and Sacramento Capitol Mall

This post is part of a series analyzing how job sectors will affect economic recovery in five California regions.

Much like the rest of California, the greater Sacramento region experienced an adverse employment shock during the pandemic. But the Sacramento metro area, which encompasses El Dorado, Placer, Yolo, and Sacramento Counties, did a bit better than the region and state overall. The government sector, which understandably looms large, may have shielded the metro from heavy losses.

At 6.9%, unemployment for Sacramento metro was much lower than the 8.2% statewide rate for March 2021, and the unemployment picture has looked better than statewide since the start of the pandemic. However, about double the number of metro area residents remain unemployed—or about 75,000—from one year ago. And unemployment is sometimes substantially higher in surrounding counties; currently the rate is 10%–15% in Sutter, Plumas, and Colusa Counties.

Although employment in Sacramento metro dropped nearly 14% in April 2020, since then the region has experienced a steady recovery. By March 2021, employment had recovered by about 70%—a bit better than statewide.  Employment numbers remain about 50,000 behind those one year ago.

Most job loss in Sacramento (67%) came from declines in sectors hardest-hit by the pandemic, mirroring trends seen across the state.  At 16% below levels from last year, work in accommodations and food services took the largest hit and continues to account for about half of the lingering jobs gap.  Arts and entertainment fell 42% and other services fell 17% as of March 2021, but these make up a much smaller share of the Sacramento economy.

Three industries helped protect the Sacramento metro from deeper cuts. Most notably, government employment, which is the largest sector in the region, is down only 3% compared to 8% statewide. Whereas government employees tend to be local in the rest of California—working in such roles as city and county administration, protective services, or social and educational services—in Sacramento, government workers serve in similar roles at the state level. In the past year state revenues have outstripped expectations, shielding the state workforce from cuts. This situation could take a turn for the worse in the future.

This difference matters a lot because local government employment has suffered greatly during the pandemic—down 10% statewide and 9% in the Sacramento metro—arguably resulting from the fiscal stress and social distancing requirements for cities and municipalities. State government employment has increased by a small margin (2%) compared to one year ago in Sacramento, even though it’s down 5% statewide.

And over the past year, construction and transportation jumped into positive territory for Sacramento. In fact, construction jobs in Sacramento grew faster than in any of the 13 largest metros in California, perhaps reflecting strong and growing demand for housing in the region. Similarly, transportation and warehousing jobs increased at twice the statewide rate and only behind the Riverside and Stockton metro areas, all benefiting from the increase in demand for goods purchased online.

A year after the pandemic, the Sacramento region is well on the way to recovery.  Employment is just 4.5% below levels one year ago and unemployment has dropped by 50%. However, remaining challenges in leisure and hospitality are severe and may take time to sort out. Much like Los Angeles and the Bay Area, fully reopening restaurants and resuming business travel will be key to getting Sacramento back on its feet.  Meanwhile, many businesses have closed and others may resume activity with a different workforce.

Targeting sectors and areas most affected in the Sacramento region through federal and state business support programs may speed recovery for hard-hit restaurants and bars as well as for businesses in traditionally underserved communities. Business and job recovery in these sectors can begin to bring the region beyond the metro area back to whole.

Our next post explores the labor market challenges faced in the Southern California region.

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