North Bay unemployment falls as labor force shrinks

Across Sonoma, Solano, Marin, Napa, Mendocino and Lake counties, the labor force was smaller than a year earlier in every county, while resident employment also declined. California’s own figures show the same dynamic: the state’s labor force shrank by 337,200 workers, or 1.7%, from a year earlier even as the seasonally adjusted unemployment rate eased to 5.1% from 5.5%.

The biggest signal in the North Bay data is healthcare. In Solano County, employers added about 400 jobs over the year, with healthcare alone up roughly 1,000 jobs, or 3.2%. Eyler said healthcare employment was also up about 2.6% in Sonoma and by about 500 jobs in Marin, while Napa was roughly flat.

That concentration matters because healthcare has become the main engine of payroll growth across California. Beacon Economics said state payrolls rose 0.8% from a year earlier, but without healthcare, employment would have increased just 0.2%. For investors, that keeps attention on hospital operators and health systems that are still adding staff even as the broader labor pool thins.

Solano shows how misleading the unemployment decline can be. Its jobless rate fell to 5.5% from 5.7%, even as the county lost roughly 4,800 people from its labor force and about 4,000 employed residents. Eyler said the rate came down “primarily because there’s been a shrinking of the pie,” not because employment expanded faster than labor supply.

The story is relevant beyond local labor statistics because a smaller workforce can ease unemployment while also limiting long-term growth, consumer spending and tax revenue. It can also complicate the outlook for employers that need staffing, especially in healthcare, where NorthBay Health’s clinic buildout and planned Fairfield medical center expansion are adding demand.

In the public markets, the labor mix favors healthcare operators over cyclicals tied to a stronger local goods economy. HCA Healthcare, Tenet Healthcare and Universal Health Services remain exposed to the same industry-wide labor and margin pressures, but the North Bay data reinforce how demand for medical staffing and services is staying resilient even as other job categories soften.

The next test is whether the shrinking labor force proves temporary or structural. Eyler said retirement is one possible explanation, though migration and outflows from California could also be at work, and he cautioned that the preliminary numbers may be revised. Market participants will be watching the next state and federal employment releases to see whether healthcare’s lead persists or whether August’s drop in unemployment was mostly statistical noise.