S.F.'s new job problem: Everyone's working City's figure down to 4.4 percent as boom goes far beyond tech

Owner Jeannie Kim (right) says she is now having trouble filling kitchen jobs at Sam's Diner in S.F.'s Mid-Market neighborhood. "Five years ago you had people coming in looking for jobs nonstop," Kim says. Owner Jeannie Kim (right) says she is now having trouble filling kitchen jobs at Sam's Diner in S.F.'s Mid-Market neighborhood. "Five years ago you had people coming in looking for jobs nonstop," Kim says. Photo: Leah Millis, The Chronicle Buy photo Photo: Leah Millis, The Chronicle Image 1 of / 7 Caption Close S.F.'s new job problem: Everyone's working 1 / 7 Back to Gallery

Jeannie Kim, owner of Sam's Diner in the up-and-coming Mid-Market area, has a problem plenty of employers outside San Francisco would love to have.

She's got jobs but nobody to fill them.

"Five years ago you had people coming in looking for jobs nonstop," Kim said recently. "Now, I've never had so much trouble finding kitchen help. We always pay more than the minimum wage, but we can't find people. They're all working."

Most of them, at least.

San Francisco's unemployment rate shrank to 4.4 percent in April, its lowest level since 2008 and well below the state figure of 7.3 percent. The city had the third-lowest unemployment rate in California behind only neighboring Marin and San Mateo counties.

"It's pretty low," said Ted Egan, the city's chief economist. "It can't get much lower."

San Francisco's tech boom, which studies say has created additional support jobs ranging from baristas to attorneys, is credited with much of the city's economic recovery. But there has also been unforeseen growth in other areas, Egan and others said.

"I'm surprised by the recovery in construction," Egan said. "It's much stronger than I thought."

Manufacturing boom

Manufacturing has also been an unpredicted success, reversing a decades-long trend of shedding jobs.

San Francisco's manufacturing sector grew in 2012 for the first time since 1989, figures from the city's chief economist show. Much of that growth has been led by quality food products, specialized textiles and companies that bridge the gap between manufacturing and traditional tech or biotech firms, observers said.

Planet Labs launched a network of 28 shoe-box-size Earth-imaging satellites in January that were built at its facility in SoMa, where it employs about 50 people. The company, which its executives sometimes refer to as San Francisco's space agency, recently had 11 job openings posted on its website.

And while San Francisco recently lost high-end chocolate maker Tcho, which moved from Pier 17 to Berkeley, the city is still producing gourmet chocolate, like Poco Dolce, which employs 12 people on Third Street in the Dogpatch neighborhood, according to the city's economic development office. Rickshaw Bagworks is busy producing custom messenger bags in the same neighborhood.

"There is definitely something happening in San Francisco in terms of a manufacturing revival," said Shannon Spanhake, a spokeswoman for Planet Labs and former innovation adviser to Mayor Ed Lee. "This is where we have access to the best talent."

Nearing record low

San Francisco's success on the jobs front is not unprecedented, but it's close. The city's unemployment rate was as low as 3.7 percent in 2006 before what has been dubbed the Great Recession. It was 3.0 percent in December 2000 as the dot-com bubble burst.

But joblessness has been cut by more than half since Lee, who has focused relentlessly on job creation, was appointed as an interim caretaker in January 2011, when the unemployment rate stood at 9.4 percent.

"I have always said that the biggest income gap is between those who have a job and those who do not," Lee said in a statement. The latest "unemployment numbers demonstrate, once again, that our economic policies are working and that more people than ever are sharing in the success of our city."

Lee has pushed jobs on multiple fronts, including overhauling the city's tax code so it will no longer penalize businesses for hiring more workers and easing affordable housing requirements for developers to stimulate more construction, while also setting up a dedicated funding stream for affordable units.

For a man who shortly after he took office said "I'm not a Twitter guy. I'm not even a Facebook guy," Lee has embraced technology companies. He approved a tax break on stock options and another for the Mid-Market area that was designed, in part, to keep Twitter from decamping for the Peninsula.

Remarkable transformation

Kim, who has owned her Mid-Market diner since 2007, says the transformation she sees taking place around her is remarkable.

"I've got to really hand it to him," Kim said. "He's done an incredible job. It's not perfect, but I think he genuinely wants to see the city grow."

Since 2010, San Francisco's private sector has added more than 67,000 jobs, a 15 percent gain, making it the second fastest-growing large county in the United States in terms of private-sector employment, according to a report by Michael Mandel of South Mountain Economics released in April and underwritten by Bloomberg Philanthropies.

From 2007, when the Great Recession started, to 2013, San Francisco added more private jobs in terms of real numbers - 51,800 - than 47 out of 50 states, according to the report. The city was topped only by Texas, New York and North Dakota, with two of those states directly involved in the oil and gas boom.

"By any measure, San Francisco has far outperformed the rest of the country since the Great Recession started in 2007," Mandel wrote. "Between 2007 and 2013, the number of private-sector jobs in the city rose by about 11 percent, compared to a decline of 1 percent nationally."

The city's tremendous job growth hasn't come without repercussions, however.

San Francisco's housing supply hasn't kept pace with surging demand. Rents and home prices have skyrocketed. The Brookings Institution earlier this year published a study showing that the gap between rich and poor was growing faster in San Francisco than in any other city in the country.

Tech workers and the chartered buses many of them ride to corporate campuses in Silicon Valley have been the targets of demonstrations by tenant advocates and other groups protesting gentrification of the traditionally Latino Mission District and the rising cost of living in the city.

2 percent possible?

And the city is expected to add still more jobs.

Beacon Economics is predicting that by the end of the year, the area encompassing San Francisco, Marin and San Mateo counties will see employment overtake its previous dot-com boom peak.

San Francisco is approaching what economists call "full employment," where those out of work equal the number of positions available, Egan said.

"If the city continues to grow jobs at this pace, it will grow the labor force to take the jobs," Egan said. "You just don't see the unemployment rate go to 2 percent."