2025 Economic Trends in San Diego: Tight Labor and Housing Markets, High Household Income
San Diego’s economy remains resilient, despite a limited housing supply that continues to exert pressure on the labor force according to leading economist Christopher Thornberg, who spoke at the 2025 San Diego Economic Forum. The event was presented by Western Alliance Bank at San Diego State University in collaboration with the San Diego Regional Chamber of Commerce and San Diego Regional Economic Development Corporation.Thornberg heads Beacon Economics, a respected provider of economic research, forecasting and industry analysis and data services.
Liquidity in the market is limited, with many San Diego homeowners locked into low, pandemic-era mortgage rates. Meanwhile, the median price of a San Diego home has just crossed the million-dollar threshold, according to Thornberg of Beacon Economics, a provider of economic research, forecasting and industry analysis and data services.
“There are two parts to the conversation about the economy,” Thornberg said. “The first part is what we think is happening — our narrative, our lived experience. But then you have to talk about what is actually happening: the objective, statistical reality.”
The “headwinds” Thornberg noted include the trade deficit, flagging consumer confidence and limited housing supply, particularly in Southern California. However, while acknowledging recent headlines on weak consumer confidence, uncertainty surrounding tariffs and the downward revision of job numbers, he disputed that these indicators point to a recession ahead.
“This is a good economy, folks,” Thornberg said. “What you’re seeing here is an economy that is slowing down, but not one that’s going to dive into a recession.”
Unemployment, investment concerns offset by robust foreign direct investment
The San Diego unemployment rate ticked up to 5.2% in 2025, while inflation in the region rose to around 4%. But wages continue to increase in San Diego, and the poverty rate remains the lowest it has ever been, Thornberg said.
Despite slow job growth relative to the rest of the United States, household income in San Diego continues to rise. Foreign direct investment also increased this year, with the establishment of Novartis' new San Diego research hub by the biomedical giant bringing a $1.1 billion boost.
Housing prices remain high, availability is low
Liquidity in the housing market is limited, with many homeowners unwilling to abandon their low, pandemic-era mortgage interest rates. In markets across the U.S., including San Diego, the median home price has crossed the million-dollar threshold.
At the same time, limited housing supplies, combined with the high cost of living, are exerting pressure on the labor force in both San Diego and across the country. The affordability crisis mirrors a national trend and can be more accurately framed as a housing supply shortage, Thornberg said.
Despite these pressures, San Diego has experienced remarkable growth in its labor force since the start of the pandemic, outpacing the national average. Foreclosures and delinquencies remain low, and the equity share of household real estate wealth is near an all-time high.
Interest rates, tariffs and AI contribute to uncertainty in labor market
Since the pandemic, job growth has remained flat, at 1.9% in California compared to 1.95% in the U.S. overall and as high as 9.7% in Texas. Fewer software engineering jobs in San Diego compared to 2019 may indicate the disruptive impact of AI, mirroring a national trend.
“In 2025, the economy has slowed down. We had negative growth in the first quarter; second quarter was a little bit positive,” Thornberg said. “The big source of the slowdown, by the way, was a big slowdown in government spending.”
Thornberg added that while consumer spending has slowed, household incomes continue to rise. California’s per capita income is the highest in the nation, with 11 California counties making the top 100 in a national ranking of per capita income. Earnings data are stabilizing, while the poverty rate is close to an all-time low, at just under 12%.
He noted that net worth continues to rise, even for the bottom 50% of households, which has actually seen stronger net worth increases over the past five years than the top 50%.
Overall outlook: San Diego’s strengths
Overall, San Diego remains well-positioned to weather any economic headwinds. While reversals on tariff policy have caused some uncertainty, trade remains a strong economic driver in San Diego. As the national effective tariff rate has risen from 2% to roughly 18% nationwide, San Diego continues exporting $33 billion in goods across the southern border to Mexico.
San Diego’s strengths include a robust science and technology sector, strong exports, an educated workforce and a thriving ecosystem of entrepreneurship and innovation. Ranking #2 in the U.S. for the number of patents received, the region’s innovation ecosystem catalyzes innovation that creates companies, creates jobs that scale and delivers other jobs in the area, Thornberg said.
With rising household income and a great quality of life, San Diego appears poised for continued economic resilience and prosperity in the coming years.
Watch the full presentation below to hear from the San Diego Chamber, San Diego Regional EDC, and Chris Thornberg.
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