Sonoma County’s economic recovery gains strength but delta variant threat looms

What a difference 18 months makes for the Sonoma County economy.

The coronavirus pandemic that struck in March 2020 gave the local economy a whiplash unlike any since the United States entered World War II in 1941. County unemployment soared to a mind-boggling 15.4% the month after the public health crisis took hold, as employers shed tens of thousands of workers.

The only part of the economy that kept a strong pulse during the free fall was the housing market. But it was a double-edged sword.

Office closures prompted technology and other white-collar workers to exit Silicon Valley and the Los Angeles area and flood into Sonoma County to buy cheaper properties for home offices.

The result: In March 2020, the median price of an existing single-family home was $678,910. By June 2021, the median price tag ballooned to an all-time record $825,000.

Middle-class local residents were priced out of the booming housing market, as the gap between the haves and have-nots widened.

Many of the less fortunate, including some who had lost good-paying jobs as the local economy tanked, turned to food banks for sustenance.

After nearly a year of tumult, COVID-19 vaccinations and masks provided prime antidotes for an economic recovery that took hold early in 2021. Since February, the county jobless rate has deflated and remained under 6%. The latest figure in August is 5.3%, the lowest mark since May’s 5.2%, which was the best mark since the pandemic detonated the economy.

“We’ve seen really good recovery momentum in 2021 right into the summer,” Sonoma State University economist Robert Eyler said.

Area employers have hired about 15,000 workers this year through August, 5,300 of them this summer, according to labor market data. That leaves the local workforce of 235,500 people, about 13,500 workers short of its size at the end of 2019.

Since April 2020 at the pandemic’s unemployment peak, county employers have added 31,700 people to their payrolls.

“The economy is roaring back, but some people are still struggling,” said David Goodman, who runs Redwood Empire Food Bank, the largest in Northern California serving Sonoma, Mendocino, Lake, Humboldt and Del Norte counties.

“Not all boats rise during this time.”

With emergency financial benefits from the state and federal government expired and personal debt payments to make, Goodman expects to continue seeing great demand for food. His organization gave away $60 million worth of meals during the first year of the pandemic (from March 2020 to March 2021), double the value of the total giveaway during the same period in the previous year.

Tourism collides with delta variant

When California lifted the remaining public health restrictions in mid-June, Sonoma County, a popular summer destination for in-state and other domestic tourists, experienced an early summer bounce in hotel occupancy levels, air travel and eating and drinking at restaurants and brewpubs.

However, the pandemic disease hung around for the summer excitement, and boldly staged a resurgence of infections, hospitalizations and deaths — thanks to the powerful delta variant of COVID-19. This viral strain remains the No. 1 threat to derail the year’s steady economic expansion.

Although his Santa Rosa manufacturing mini-conglomerate of three companies catering to wineries from Canada to Chile is on track for 10% sales growth in 2021, owner and president Ed Barr has had three employees infected by the coronavirus and as many as 25 of his 35-person workforce exposed to it.

“With vaccinations, we’re in a better place going forward,” Barr said. “But in business and in general, sure I’m concerned there could be disruption” from another variant of the virus or immunization from inoculations weakening protection from infection.

Sonoma County reported 33 more residents died in August from the coronavirus, the second-deadliest month of this year after January, and the fourth-deadliest of the ongoing pandemic.

Pandemic still stokes fear

With 76% of county residents age 12 or older defended by vaccinations against the dreaded infectious disease, the local economic recovery chugs along — trying to avoid a debilitating autumn wildfire. And that’s despite many employers in September again delaying mass returns of white-collar workers to offices a month or even into 2022, waiting and hoping for delta to depart.

Greg McBride, chief financial analyst at Bankrate, a U.S. financial data provider, said Americans continue to view the pandemic as the greatest economic threat over the next six months.

Six of 10 people across the country are concerned about their jobs and incomes taking a hit, he said.

“Nervous households are less likely to spend, and recent pullbacks in travel and consumer discretionary purchases bear this out,” McBride said.

Consumer spending will be key as the year winds down, Sonoma State economist Eyler said. Many people may hold off buying houses and cars and taking trips, if the coronavirus spikes in the fall.

Saving and accumulating wealth is a “nasty trade-off,” he said, because it’s good for long-term economic growth, but spending fuels the economy in the short run.

Consumers “shouldn’t be fearful we’ll recess again,” the economist said, but they “shouldn’t go buck wild” buying big-ticket items, either.

Eyler doesn’t expect a full local recovery, with joblessness at 3% to 3.5%, until the end of 2022 or sometime in 2023.

What occurs in the next six months, he said, will largely determine when the county labor market finally gets back to its sturdiest posture with employment similar to the end of 2019, before the pandemic suddenly “turned the lights off” on the local economy in the first quarter of last year.

In the fall, Eyler predicted a slowdown in the labor market as summer seasonal jobs, particularly at restaurants, hotels and bars, end. With the pandemic uncertainty, potential fires and lingering supply chain kinks frustrating businesses across the board, many industries concerned about rising costs of doing business could pare hiring.

Employers forced to reinforce public health

In mid-September, the nation hit a grim milestone of 1 in 500 people dying from COVID-19, and a 663,000 death toll, according to the Centers for Disease Control and Prevention.

In California, it’s 1 in 590 people who have perished from the contagion.

To help keep the economic recovery from stalling in the fourth quarter, President Joe Biden moved in September to make businesses responsible to help contain further spread of the virus. The administration’s planned vaccination mandates, which would affect almost two-thirds of the U.S. workforce, are the most extensive government intervention into private companies and employer practices since the pandemic began.

The requirement being developed by the U.S. Department of Labor would apply to businesses with 100 or more workers. Those employees would need to be fully vaccinated or show a negative virus test result weekly.

In Sonoma County, earlier this month a similar vaccination mandate with a weekly testing alternative went into effect for the county’s 4,400 workers and the area’s first responders. County Health Officer Dr. Sundari Mase also urged local private-sector employers to make vaccinations a requirement for employment, but stopped short of issuing an inoculation mandate.

Meanwhile, Eyler anticipates the county will end 2021 with a jobless level at 4.5% or less. That would underscore a big rebound after starting the year at 7.1%, but remain well north of the 2.6% jobless mark in December 2019. That’s the pre-pandemic yardstick that the economist uses to measure the pace and gains of post-pandemic recovery. At that time, the local civilian labor force was 255,100 people, with 248,500 working and 6,500 without jobs.

Hospitality sector critical

A key driver of the county’s economic engine is the leisure and hospitality sector, the hardest hit by economic fallout that prompted jettisoning 14,000 jobs at the beginning of the pandemic.

Although public health restrictions were fully lifted in June, and nearly twice as many workers remain jobless since the end of 2019, most local restaurant and hotel operators continue grappling with the vexing problem of hiring a full staff.

Jerry Nickelsburg, a UCLA economics professor, said hospitality operators statewide have added 150,000 jobs from May to July, an encouraging sign for the North Bay.

Also, the bump in domestic travel in early summer helped the county, he said.

“Sonoma County in general caters to domestic tourists,” said Nickelsburg, faculty director of the UCLA Anderson Economic Forecast and a Santa Rosa native.

As visitors have returned, hotel occupancy rates reached 77% in July. That’s slightly below the 81% of July 2019, though, according to STR Inc., a national hotel business tracker.

Hotels in August experienced a reduction in guests because of the delta variant, said Claudia Vecchio, chief executive officer of Sonoma County Tourism, the local agency responsible for promoting the industry.

“In June and July, we thought we were coming out of the pandemic. … We roared back,” Vecchio said. “That has definitely not continued.”

The tourism agency has focused on trying to get corporate retreats and smaller business meetings back here, but Vecchio said that many of those bookings were postponed until spring 2022.

Reflecting the continued pandemic woes, Charles M. Schulz-Sonoma County Airport had a recent passenger dip, with 45,086 travelers in August compared to 48,926 in July, said Jon Stout, the airport manager.

Restaurants recalibrate as costs rise

Clark Wolf, a veteran food industry consultant who spends part of the year in the county, said the pandemic has prompted a “recalibration and reorganization” of the restaurant industry.

As their leases recently expired, a few area restaurateurs have stepped away from the beleaguered business to do other things, he said.

Overall, after the protracted pandemic lockdown and months of struggling to hire workers, Wolf said, most local restaurants are offering fewer menu selections and operating with smaller staffs.

There are bright spots though, like veteran chef Dustin Valette’s recent long-awaited debut of The Matheson Restaurant in downtown Healdsburg.

Another is Jackson’s Bar and Oven in Santa Rosa’s Railroad Square section.

Co-owner Josh Silvers said his payroll is now about 50 people, and he got a robust response to a recent online posting for two more servers and a busser.

The restaurant’s revenues have sharply rebounded, but he acknowledged the “unique situation,” of having the new AC Marriott hotel across the street and a nearby Hyatt location that added rooms prior to the pandemic, to boost his restaurant receipts.

Despite the upswing, Silvers said his cost of doing business, specifically the wages and wholesale prices of steaks and other foods, has increased, too.

“Everything is getting more expensive, so it’s harder and harder to make a buck,” the veteran restaurateur said.

Although Silvers is optimistic about the business headed into the final quarter of the year, he’s concerned about the delta variant and the portion of the community still unvaccinated.

He favors mandating vaccinations for his employees and customers, but said: “I feel like we need the state or federal government’s cover to require it.”

Million-dollar home sales mount

Housing prices have lost some sizzle the past couple of months. But the county’s single-family homes market still carried a median sale price of $770,000 in August, compared to $701,000 the same month of 2020.

Apartment rents have jumped. The average monthly rent for a Santa Rosa apartment in August was $2,071, up 8% from a year ago, according to listing site RentCafe.

Jim Michaelsen, a sales manager with Compass real estate agency in Santa Rosa and Petaluma, said there’s been a slowdown in sales of cheaper houses because of a lack of available properties.

The high end of the housing market, though, is still booming. Homes sold for over $1 million so far this year nearly doubled the number closed during the same eight-month stretch of 2020.

And through August, 49 single-family homes sold for over $4 million in Sonoma County, compared to just 19 similarly priced houses closed over the same period last year.

“I used to think $1 million to $2 million was the high end,” Michaelsen said.

Investment in ‘local’ retail

Once the perilous effects of the coronavirus fade, there’s optimism the economic recovery will steadily gain momentum. Owners of the Dandelion, a new store at Montgomery Village in Santa Rosa are betting on it.

Moms Tifani Beecher and Melissa Stewart wanted to open a place where moms can shop for kids’ clothes and items for themselves.

They designed their store to include a community space for children’s programs and a pint-size portrait studio. They also have partnered with florist, M Designs, for a floral cart inside the store.

“I think people are craving to shop local,” said Beecher, who is raising four children ages 1½ to 7.

“Just as moms, we saw this giant hole in our shopping experience and decided to jump into it.”

Staff Writers Bill Swindell and Ethan Varian contributed to this story.