by Saiqa Anne Qureshi, Staff Writer, FWSF MarCom Committee
With constant media alerts about layoffs in government, stock market instability and tariff threats it is sometimes difficult to take a step back and actually assess what is happening. In late April 2025 the US Bureau of Economic Analysis released data that the US economy contracted in the first quarter (January to March 2025), by approximately 0.3%, seasonally adjusted, indicating negative growth of 0.3%. This net negative GDP was due partially to a surge of imports to the US as businesses and consumers ordered in advance of tariffs and government spending is also down.
Consumer spending, the biggest driver in the US economy, is down in the first quarter and the index of consumer confidence has fallen for five months in a row, with tariffs indicated as the top concern of consumers, with fear of recession secondary.
However, from February 2023 to March 2025 the unemployment rate in the United States ranged from 3.4% to 4.3% with March 2025 hitting 4.2% nationally, and the California unemployment rate hitting 5.3%. The Bay Area unemployment has swung wildly since 1990 (when regional trend tracking began) with peaks of 6.5% in 1993, 6.9% in 2003-2004, 10.5% in 2009-2010 and over 8% briefly in 2020 during the pandemic.
In April 2025, Bay Area unemployment held steady at approximately 4%, about a point lower than the state average. The unemployment rate is a lagging indicator and it could take several months for this to catch up to the contracting economy.
While there have been multiple waves of layoffs in the tech sector there has been an increase in health care hiring that is speculated to have softened the blow in terms of the overall data. Additionally, California is now the world fourth largest economy, surpassing Japan at $4.1 trillion, behind only the US, China and Germany.
Note that economic full employment is normally defined as 4-5% unemployment, as that allows for frictional employment and some surplus workers looking for jobs. There is, however, a concern about underemployment. That is where people are working but aren’t fully utilizing their skills or abilities or working as many hours as they would like to, as they simply cannot find enough work, or work directly in their field.
Another concern is the inflation rate, as that affects the prices paid for goods and services. That has ranged over the last three years as well, but is trending down as of March 2025. The potential impact of the tariffs and other factors remains to be seen in succeeding months. Three years ago, in Spring of 2022 the rate was 8-9%, dipping to below 4% in Spring 2023, and floating between 2.5-3.5% in the last year. The consumer price index (CPI), that measures the price of a basket of goods and is used as a good indicator of inflation, was 2.4% from March 2024-2025, down from 2.8% the month before. The Federal Reserve target is 2%, and the major factors influencing inflation are supply chair issues, housing market pressures and pent-up consumer demand.
The consumer price index specifically for food is about 3%, up from 2.95%, due to increased costs in raw materials, rising costs in labor and egg prices increasing 57% in 2025. There is a sentiment that life “feels more expensive” and that might be due to a 26% increase in prices from January 2019 to January 2025. That includes inflation in key categories like food; groceries 29% and restaurants 34%; Utilities 32-36%; Transportation including vehicle costs to purchase 21-30% and car insurance 55%; and medical care, prescriptions 9% and services 18%. Most households absorbed those price increases, however on average wages grew faster than inflation, with a 33% increase in wages from Jan 2019-2025. That should indicate that wages grew more quickly than inflation on consumer goods, however that assumes average wage inflation and average consumer goods, and that might not be the experience of everyone in the grocery store. It is very possible that for an individual consumer their wages were outstripped by the increases in costs of the food, housing costs, insurance and medical expenses that they personally fund.
In summary, unemployment rates in the Bay Area are sitting at levels that represent full employment, even considering some underemployment and layoffs in the tech sector. Inflation is still higher than Federal Reserve goals, but is much lower than recent peaks, and despite an increase in prices since 2019, wages have outstripped those average increased costs. There was a contraction in growth last quarter, so that could be an indication of further instability with growing concern regarding the impact of tariffs and recession with inflation that is still above target numbers. Critically, the California economy is growing, as the state GDP grew by 6% in 2024, exceeding the US at 5.3% and China and Germany at 2.6% and 2.9% respectively.
From Connections Newsletter (Food for Thought): May 2025
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Resources
https://www.statista.com/topics/768/cost-of-living/
https://aier.org/cost-of-living-calculator/
https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm
https://www.bls.gov/news.release/pdf/empsit.pdf
https://labormarketinfo.edd.ca.gov/file/lfmonth/sanf$pds.pdf
https://vitalsigns.mtc.ca.gov/indicators/unemployment
https://www.npr.org/2025/04/30/nx-s1-5380204/trump-economy-gdp-tariffs-recession-consumers
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