For all the hype around artificial intelligence, it’s not tech but healthcare and private education that are propping up California’s economy — adding more than 168,000 jobs in the past year.
Meanwhile, white-collar office jobs have been steadily eroding since 2023 and the state’s unemployment rate of 5.5% remains the highest of all states.
According to the latest state jobs report, through July, professional and business services shed 46,100 roles, financial services dropped 17,000, and information declined by 12,500.
In San Francisco and San Mateo counties, jobs overall fell 1,800, or 0.2%, from last year. The biggest hit came in professional, scientific, and technical fields, which shed 7,100 positions — partly offset by a 3,900-job gain in administrative and support work. Financial services and manufacturing each lost 1,900 jobs, while government payrolls shrank by 500.
AI is accelerating the shift, automating entry-level office work and fueling anxiety among new grads while shaking up the broader white-collar labor market. The spike in federal interest rates compounded the pain, pushing companies to pull back from pandemic hiring sprees and leading top tech firms to shed tens of thousands of roles.
Silicon Valley hiring remains far below its peak. From 2023 to 2025, tech job postings in San Francisco were down 55% compared with the pre-pandemic average, according to labor analytics firm Lightcast.
Even government work — once a safe haven for white collar workers — is no longer insulated. Local budget deficits and federal cuts are driving layoffs: San Francisco and San Mateo counties shed 4,700 government jobs last month alone, making up 98% of the region’s total losses.
Since the start of the year, San Francisco’s unemployment rate has jumped an entire percentage point, from 3.9% to 4.9%.
“We’re at a point now where there are too many qualified workers chasing too few jobs,” said Michael Bernick, an employment attorney with law firm Duane Morris and a former director of the state EDD.
While a recession hasn’t hit, the current state of the cycle can be considered a Great Reshuffling: fewer office jobs, more service roles, and plenty of capital still sloshing around.
According to Pitchbook, total venture capital spending is still higher than pre-pandemic levels. Thanks in large part to OpenAI's $40 billion funding round this year, 63% of all funding in the country flowed specifically to the Bay Area in the first quarter, up from the average of 35%.
But while the rise of the AI industry has been explosive, experts say it's too early to gauge the ultimate impact on the labor market. What is apparent is that there hasn’t been a corresponding explosion of new jobs yet.
History provides a guide. During the last boom, it took years for tech startups to blossom into major employers by building and selling popular mobile and cloud computing technologies.
A Glassdoor analysis finds today’s 1.9% job decline mirrors the 2008 recession’s 1.8% drop, which took three years to recover back to pre-recession levels. By contrast, the dot-com bust dragged on nearly a decade before employment recovered.
There are modest signs of resilience: San Francisco and San Mateo counties added 1,000 professional and business services jobs in July. Unemployment, which has jumped up recently, has remained steady year-over-year while the number of layoffs are nowhere near the levels of 2023.
“Even if the decline in tech employment is relatively modest, that may be cold comfort for workers trying to break into the tech industry,” wrote Daniel Zhao, the author of the Glassdoor report.
“The resulting traffic jam of disillusioned new grads and deposed experienced tech workers is a major reason why workers are so sour on the tech job market right now.”