|Map Key: Median Annual Household Income by Region|
|Upper Income Region||$79,000 - $90,000|
|Upper-Middle Income Region||$66,000 -$78,000|
|Middle Income Region||$61,500-$65,500|
|Lower-Middle Income Region||$57,000 - $61,000|
|Low Income Region||$21,000-$54,000|
Droves of people are leaving California in general and LA specifically to escape the high cost of living and scarce housing stock. This is the biggest labor market story in California; how can businesses compete with a shrinking labor pool that won't expand anytime soon?
A significant number of those exiting LA-OC are going to less expensive parts of Southern California like San Bernardino or and Riverside, but a majority are fleeing the state entirely. According to an analysis of data from United Van Lines (a residential moving company), the Federal Reserve of Chicago estimated hundreds of thousands of people have left in the last several years.
More than 21,000 families left the Los Angeles metro area and California, at large, to move to other states from 2018-21, according to the moving company’s records. Top states receiving fleeing Californians during that period were Texas, Washington, Florida and Virginia. Plenty of families moved into the state from 2018-21, but the net adds up to hundreds of thousands in lost population from this outmigration and other factors.
“Los Angeles saw its population steadily decline during the pandemic,” states Governing.com. “A continuing exodus from these cities, experts say, could eventually translate to a major shake-up across housing markets, demographics and corporate landscapes.”
Will the California Economy Crater in 2023?
Probably not, but it won’t be smooth sailing, either. The economists at the Federal Reserve Bank of San Francisco also note this problematic outmigration trend in their labor market assessment.
“Increasing cost of living across the (Western U.S.), including the rising costs for essential expenses such as food and rent, continued to drive wage pressures upward,” they write in the Sept. 2022 edition of the Beige Book. “Employees across sectors continued to demand more comprehensive benefits, flexible work arrangements, and upfront hiring incentives.”
The Beige Book is published by the Fed eight times annually and contains summaries of the economy across the U.S. on a district level. The San Francisco Fed serves District 12, comprising eight states that make up the West.
The UCLA Sept. 2022 Anderson Forecast paints a relatively rosy picture of LA’s near-term economic future, however.
“Migration out of the state, coupled with a lack of international immigration and lower birth rates, has resulted in a historic reversal of California’s annual population gains,” the report acknowledges. “At the same time… California households are becoming wealthier, on average, than those of other U.S. states. Investors continue to flock to the state in search of superior returns, and domestic out-migration, though it will continue for some time, is beginning to taper off because of the decreasing affordability of alternative cities.”
Some of those alternative cities include Riverside and San Bernardino, which have grown wealthier in recent years, according to the U.S. Census. A family fleeing high home prices in the LA-Orange County area may not be able to find an affordable home any closer than Bakersfield, Fresno, or all the way south toward the inland Mexican border at Calexico, where incomes are closer to averages in more affordable U.S. states.
Salaries for Specialized Skills, Engineering and IT Professions Soar across California
At SkillsetGroup, we foresee some salaries, like for accounting, finance, administrative, industrial workers, ticking up and stabilizing behind the inflation rate, which has been rising a record pace.
Wages and salaries for rare and specialized skillsets have climbed drastically, however. We expect CNC machinists and programmer salary averages to jump by 10 percent, based on what we’re seeing in the market in autumn of 2022, for example.
See our geographically adjusted 2023 salary guides for more detail:
IT professional salaries have soared roughly 20 percent above pre-pandemic levels. We don’t expect these labor costs to ease until a cohort of newly trained software developers, network architects and IT security analysts, etc. enter the marketplace – even if inflation eases significantly in the next year.
Moves like the Fed’s recent rate hikes to rein in inflation usually come at the expense of salaries and employment. Because the Fed is trying to engineer a “soft landing,” that is, curb inflation without hurting the job market too much, these kinds of workers are in the best position; highly skilled fields will be somewhat isolated from this downward pressure.
This will likely hold true to some extent even if the U.S. economy has a “hard landing” and falls into recession in reaction to Fed actions.
The experts at SkillsetGroup also predict an equalizing of salaries for specialized IT professionals and engineers across metro areas within California as more companies adopt remote work policies. For certain types of jobs, companies won’t be able to pay less than those in an adjacent metro, even if the cost of living is lower in the hiring company’s home region.
"Summary of Commentary on Current Economic Conditions by Federal Reserve District" or "Beige Book"
Sept. 7, 2022
U.S. Federal Reserve Bank
UCLA Anderson Forecast
Sept. 21, 2022
"How Long Will the Exodus from California Cities Last?"
July 18, 2022
"Migration Before and During the Pandemic"
Martin Lavelle, Elizabeth Kepner
July 7, 2022
Federal Reserve Bank of Chicago