Unemployment & Labor Market
San Diego's unemployment rate of 4.4% falls within the healthy range of 3.5–4.5%. However, the year-over-year increase of 0.2 percentage points indicates a slight rise in unemployment, suggesting a modest deterioration in labor market conditions. Although the headline rate remains acceptable, the upward trend points to emerging softness in job availability or matching efficiency.
Workforce Supply
The civilian labor force in San Diego is expanding at a rate of 1.66% year-over-year, a relatively strong growth in the pool of available workers. This sustained expansion indicates population or participation growth, providing a robust supply of labor for employers. As long as job creation keeps pace, a rising labor force can support economic expansion without immediate wage pressures.
Wage Growth
Average hourly earnings in San Diego are increasing at a rate of 2.83% year-over-year, below the 4% threshold for strong wage growth and likely trailing inflation. This modest pace suggests limited real purchasing power gains for workers, potentially constraining consumer spending growth. The data indicates a labor market with limited wage pressure, possibly due to balanced supply and demand.
Labor Demand
Labor demand in San Diego is weak, with a composite score of 4.03 and nonfarm payroll growth of only 0.35% year-over-year, indicating slow employment expansion. The fact that weekly hours worked are 0.758% below the 12-month trend suggests reduced scheduling by employers and softer demand for labor. These metrics collectively point to a cooling labor market, despite a still-healthy unemployment rate.
Cost of Living
San Diego's cost of living composite score is 5.2, indicating high housing costs relative to earnings and significant strain on affordability. This elevated ratio means households must allocate a large share of their income to housing, limiting discretionary spending and savings. The high cost of living undermines the city's economic attractiveness, particularly for middle- and lower-income residents.
Office Economy
The office worker ratio in San Diego is 1.62, a low score suggesting limited concentration of white-collar, professional services employment. This indicates a relatively weaker knowledge economy compared to peer metros, with greater reliance on sectors like healthcare, defense, tourism, or logistics. A low office worker ratio may constrain high-wage job growth and innovation-driven economic expansion.
Housing — Construction
Residential building permits in San Diego have decreased by 0.37% year-over-year, indicating stagnant construction activity and a minimal response to supply needs. This near-flat growth fails to keep pace with labor force expansion and does little to alleviate housing shortages. Builder caution may be due to high development costs, regulatory hurdles, or demand uncertainty.
Housing — Market Velocity
The median days-on-market for homes in San Diego is 38.0 days, with a year-over-year increase of 5.56%, indicating that homes are taking longer to sell than last year. This rising trend signals a softening housing market, characterized by cooling buyer demand or increasing supply. Contrary to a tightening market, the trend reflects a slowdown in transaction velocity, consistent with higher affordability barriers.
Conclusion
San Diego's economy exhibits mixed but overall subdued performance, earning a C grade with notable risks. Labor market indicators are broadly stable but cooling, with sluggish job growth, modest wage gains, and rising unemployment pressure. The high cost of living severely constrains affordability, while housing construction and sales momentum lag. A growing labor force is a positive factor, but structural weaknesses, particularly in the office economy and labor demand, suggest limited near-term growth momentum and vulnerability to broader economic headwinds.