After a rapid pandemic recovery, employment growth in California’s labor market has slowed in recent months. This trend—and potential signs of labor market weakness—have amplified concerns about California’s long-run economic trajectory, especially amid ongoing budget deficits. When we look more closely at pre- and post-pandemic trends across regions and sectors, however, a more varied and nuanced picture emerges. Employment growth patterns have shifted since the pandemic began, but this does not tell the whole economic story: the regions with the fastest growth have been dominated by growth in low-wage sectors.

From 2015 to 2019, employment growth was robust across California. The Inland Empire (14.7%) and the Central Valley (10.4%) saw the strongest growth, followed by the San Francisco Bay Area (9.8%). But by 2023, employment was slightly below 2019 levels in the Bay Area and the Los Angeles metro area, while jobs in the Inland Empire and the Central Valley grew at much faster rates (8.2% and 6%, respectively). This is in part due to differences in initial pandemic job losses: employment declined least sharply in both the Central Valley (-4.3%) and the Inland Empire (-3.7%) from 2019 to 2020.

A closer look at regional growth trends reveals important differences across low-wage sectors (including leisure and hospitality; other services; and trade, transportation, and utilities), middle-wage sectors (including construction, manufacturing, education, and health services), and high-wage sectors (such as finance, information, and professional services). From 2015 to 2019, low- and middle-wage sectors dominated job growth in the Inland Empire and the Central Valley; high-wage sectors also grew, but at lower rates. In the Bay Area and San Diego–Orange metros, by contrast, the strongest growth was in high- and middle-wage sectors. Los Angeles saw fairly even growth across wage levels.

This pattern changed from 2019 to 2023. The Inland Empire is the only region to experience growth across low-, middle-, and high-wage sectors, though most growth is in low-wage sectors. Meanwhile, the Central Valley lost jobs in high-wage sectors, despite high levels of overall employment growth. Conversely, the Bay Area’s low-wage sectors are nearly 7% below pre-pandemic employment levels, while its middle- and high-wage sectors have continued to grow, albeit more slowly than prior to the pandemic.

We see similar regional variation in post-pandemic growth across sectors. In sectors such as other services, leisure and hospitality, and trade, transportation, and utilities, growth was high in the Central Valley and Inland Empire; in particular, trade, transportation, and utilities jobs have grown 15.5% in the Inland Empire and 9.4% in the Central Valley. The Bay Area, by contrast, has seen an 8.4% decline in leisure and hospitality employment and a 6.1% decline in the trade, transportation, and utilities sector.

Taken together, the regional and sector-level data indicate diverging labor market trends across the state. These trends are being driven partly by the mix of sectors in each region, but also by the health and success of those sectors in each region. This points to distinct regional factors, including changing migration patterns, cost-of-living pressures, and work-from-home persistence. While inland regions have shown comparatively more economic promise in recent years, employment growth in these regions continues to be driven by low-wage sectors. In the longer term, leveraging positive economic trends in these regions so that they deliver not just higher employment but also higher wages will be key to narrowing the economic divide between coastal and inland California.