The North Bay economy is undergoing a profound transition marked by stalled job growth, shifting demographics, housing market stagnation and a wine industry facing long-term restructuring. While the challenges are significant, a noted local economist said opportunities remain — if regional leaders understand the depth of the changes underway and respond with coordinated, realistic strategies.
Robert Eyler, an economics professor at Sonoma State University and president of Economic Forensics and Analytics, presented his analysis during a Wednesday morning meeting of Business Alliance Sonoma County. Using county-level data, statewide and national trends, he described an economy that is no longer behaving as Californians have historically expected, particularly in regions once seen as beneficiaries of pandemic-era migration.
Unprecedented jobs plateau
One of the most striking indicators Eyler presented was California’s prolonged lack of job growth. “We’ve seen about a 24-month period in which we had zero jobs growth in California, which is unprecedented in the recorded history of California’s economy outside of recession,” he said.
Across the North Bay, that stagnation shows up in different ways. Sonoma and Marin counties remain below their pre-pandemic labor force levels. Napa County has posted modest gains, while Mendocino County has remained largely flat.
That said, Scott Anderson, chief U.S. economist for BMO Capital Markets, this week told Bay Area News Group, part of the same company as the Journal, that the November figures showed “tangible reasons for optimism.”
“The Bay Area and California economies showed encouraging signs of labor market stabilization in November,” Anderson told the news outlet.
From opportunity to reset
Lake County, however, stands apart, not because of growth but unmet expectations.
According to Eyler, the six-county region’s smallest is undergoing what he described as a “post-pandemic reformatting,” after early assumptions about its growth potential five years ago failed to materialize.
“Lake County is going through a weird post-pandemic reformatting of where people thought that Lake County was going to be this place where you’d see more growth like what was connected to larger places, and that faded,” Eyler said.
During and immediately after the pandemic, Lake County was widely viewed as a potential beneficiary of remote work trends. As a small rural area with connections to larger population centers, it appeared well-positioned to attract new residents seeking affordability, space and distance from urban congestion.
That anticipated surge, however, did not last. Interest faded, population and economic growth failed to sustain momentum, and Lake County is now adjusting to a different post-pandemic reality, one defined less by expansion and more by recalibration.
California ‘at a precipice’
Zooming out, Eyler warned that California is “at the precipice” one of the most difficult macroeconomic conditions possible. While inflationary pressures are present nationwide, the state’s labor market is weakening more rapidly than the national average, he said.
“California is probably feeling what you could think was a mild stagflation episode, where prices are rising but labor markets are fading a little bit faster at the same time, which are kind of is like the worst case scenario of a macro economy,” Eyler said.
Stagflation, a term coined in 1965 by British economist and politician Iain Macleod, describes the rare and problematic combination of rising prices, weak economic growth and increasing unemployment, a condition that defies what’s considered the normal relationship between inflation and labor markets. Economists consider it a worst-case scenario because, as shown during the U.S. experience of the 1970s and later documented by Federal Reserve histories, policy tools used to fight inflation or boost employment tend to worsen the other problem rather than resolve both simultaneously.
Why job growth has stalled
Eyler attributed California’s job stagnation to a convergence of structural forces rather than a single cause.
First are demographic changes accelerated by the pandemic.
“We saw an exodus of workers during the pandemic that was replaced by an influx of people who had maybe no intention to work,” he said, altering labor force participation rates.
Second is a reduction in investment.
“We saw a general reduction in investment in California outside of AI,” Eyler said. Even within technology, capital has flowed primarily toward “intellectual technologies or intellectual property technologies,” rather than labor-intensive industries.
Third is the nature of job creation itself.
“When people are getting hired, they’re getting hired for relatively low-wage jobs … rather than on the higher-wage end,” Eyler said. This imbalance slows overall economic growth, even when employment increases.
Immigration policy changes, he added, further constrain labor availability, particularly in sectors already struggling to find workers.
Undocumented workforce
Eyler was asked how immigration factors into the state’s job situation.
“We really do rely on them, and thus we need to support that population,” he said.
Federal policy shifts on immigration in the past year have produced tangible economic effects.
“We’ve probably seen taxable sales go down,” Eyler said, as changes in immigration patterns reduced consumption and economic participation. Labor shortages have intensified in agriculture and service industries, sectors that Eyler said are deeply dependent on undocumented workers.
“We are connected to an undocumented workforce and just getting things done,” he said.
As labor becomes harder to source at economically viable rates, Eyler warned that some businesses may be forced to restructure or shut down entirely. In agriculture, in particular, the challenge threatens long-term sustainability.
Wine Country reckoning
The North Coast’s wine industry, long a cornerstone of the regional economy, is entering what Eyler described as a period of “structural struggle.”
He forecast “more mergers and acquisitions” and “a contraction of that industry,” emphasizing that wine is no longer viewed as a growth sector. Instead, producers face increasing competition, consolidation and pressure to adapt.
In a follow-up interview, Eyler contrasted the business dynamics of Napa and Sonoma counties. Napa Valley benefits from natural synergies among its southern municipalities.
Napa and American Canyon function as portals to the valley, where people can live, work and visit, supported by some industrial activity. Yountville, while less diverse, operates as a high-end destination that attracts visitors willing to travel farther.
“Those three working in unison … (have) a much more of a natural feel in the way the economy works,” Eyler said.
He also highlighted increased risk for the wine and travel economy in north Napa Valley if the south valley captures more visitor spending.
“If you become more competitive in the south and there’s one way in and one way out from where most of the population is going to originate — the core Bay Area or its airports — by the time they get to Yountville, if they’re spent out, they’re not going to go to St. Helena and Calistoga unless there’s a reason to go there,” he said.
Sonoma County, by contrast, faces challenges tied to geography and fragmentation. Wineries are more dispersed, partnerships are looser and competition is stronger than in Napa Valley. While Healdsburg and the city of Sonoma have strong visitor appeal, Eyler said the county’s wine assets are “just more diverse and geographically spread in such a way that that concentration and the ability to capture more cash … is just trickier and more competitive than it is in Napa.”
Housing markets lag
Housing trends further illustrate the North Bay’s divergence from other parts of California.
While counties such as Santa Barbara, San Diego, Orange and Kern have seen median home prices rise between 58% and 63% since the pandemic — and continue growing at 2% to 3% annually — the North Bay has largely missed that surge.
“Mendocino, Trinity, Humboldt, Lake, Marin, Napa, Solano and Sonoma are all bringing up the bottom of the housing forecast,” Eyler said.
Here’s how the median price has changed in North Coast counties in the 12 months ending in November: Sonoma, -1.0%; Solano, -1.0%; Napa, -1.2%; Marin, -1.6%; Lake, -3.4%; Humboldt, -3.8%; Trinity, -4.5%; and Mendocino County -5.3%.
Mendocino County and San Francisco have lost all the median home price appreciation gained from first two years of the pandemic, he said.
Buyer fatigue, limited construction, high development costs and homeowners locked into low mortgage rates have all contributed to flat markets, Eyler said.
“There’s not a lot of building happening …. The developers are very nervous to go into a market that might be sagging,” he said.
Demographics are compounding the issue. The North Bay is attracting fewer working families, while older residents remain in place or more arrive.
“So what’s that mean, in terms of the population change, if what we attract here are wealthy pickleball players and not working families?” Eyler asked.
A regional wild card
Solano County stands apart from the rest of the North Bay for its markedly slower projected population decline, though Eyler cautioned that its outlook depends heavily on assumptions rather than current conditions.
“The only reason Solano County is not basically descending at the same pace as (Sonoma County) is because the expectation is there will be a new municipality that will show up, and there will be an increase in the number of working families in Solano County,” he said.
Eyler said he was referring to the California Forever effort to create a large new community north of Highway 12 between Suisun City and Rio Vista. He described the possibility of “a very large investment,” potentially tied to shipbuilding, advanced manufacturing or related industries, though he stressed that the outcome remains uncertain.
Backers of the community in 2024 pulled a county ballot measure that sought to streamline review, and since then have been working with Suisun City and Rio Vista to potentially annex some of the land.
Where growth may still emerge
Despite widespread headwinds, Eyler identified sectors with relative growth potential in the North Bay: health care (especially, for seniors), warehousing and delivery services.
Notably absent from the growth outlook, he noted, were wine, medical technology and life sciences. Sonoma State University, he said, is working to attract technology research that could attract such employers.
Eyler also highlighted Rohnert Park as a potential economic hub because of its aggressive housing-creation focus. He asserted that cities able to integrate housing availability with economic development could attract employers.
The North Bay’s challenges, Eyler emphasized, are structural rather than cyclical. So addressing them will require cooperation across jurisdictions, realistic expectations and a willingness to adapt to an economy that is fundamentally changing.
“We’ve got to think about a more unified way of looking at workforce development,” he said.
