Low unemployment strains some Northern California businesses

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With great care, Alejandro Lopez moved red-hot soldering copper across the outer edge of a long brass countertop, leaving a narrow bead of solder that will hardly be visible after grinding.

Lopez, 41, worked alone in the sleepy Mio Metals workshop, surrounded by numerous unused carpet-covered work tables, turret punches, shears, rollers, drill presses and brakes. The only sound was that of a gas burner heating a second soldering copper.

The $7,500 brass countertop, bound for a New Jersey residence, was the last piece produced at Petaluma’s Mio Metals, which manufactured zinc and copper countertops, range hoods, tables and shelves. Though business was booming, Mio Metals’ owner Joe Cain said he couldn’t find enough employees to recruit and train, so he had to close shop last week.

“We’ve shipped products to really great places — the Cosmopolitan resort and casino in Las Vegas, Spago in Beverly Hills; we did work for celebrities,” Cain said. “It’s glamorous products that people love. But if you can’t produce them, it doesn’t mean much.”

Cain, who lives in San Francisco, blamed the county’s historic low unemployment rate and high cost of living. Local economists and business experts say he’s got a point.

When the unemployment rate drops below what economists call “full employment,” it means businesses are hiring at a faster rate than the available workforce, said Robert Eyler, an economics professor at Sonoma State University. That could lead to wages increasing amid a thinning “talent pool,” he said.

“At some point, the unemployment rate gets so small available workers are tougher to find and maybe less productive,” Eyler said. “Is there a bad situation with low unemployment? Yes … you have a business that may go out of business because their workers are offered wages that you can’t compete with.”

Sonoma County’s unemployment rate is about 2.8%, or a seasonally adjusted 2.6%, the lowest it’s been in 20 years, Eyler said.

“This is really sort of like the 1990s boom period,” he said. “The end of this decade is starting to look like the end of the 1990s.”

Ethan Brown, program manager at the Sonoma County Economic Development Board, said such conditions can often put the brakes on the economy.

“It’s a natural cycle of the economy where labor becomes constrained and that constrains growth,” Brown said.

Cain purchased in 2004 the specialty metalworks business from John Strong, who founded it in 1981. It had been called Copperworks and operated from a butcher shop at the corner of Western Avenue and Howard Street in Petaluma.

Cain, who had no previous metal-working experience, changed the name of the company to Mio Metals but kept the Copperworks brand.

Cain said his business was the first to offer high-end copper range hoods through an e-commerce shopping cart. His first internet order went to North Carolina. Cain recalled shipping the item in a cardboard box at the Petaluma Mail Depot.

The company’s clients, which were primarily from Sonoma and Marin counties, soon included buyers from all over the country. The company started getting more requests for zinc countertops around the time of the 2008 financial crisis.

The additional product line, including zinc and brass fixtures, helped Mio Metals survive the recession period. The company soon began to thrive again. In 2012, Cain moved the business into a 3,600-square-foot warehouse on Transportation Way.

His goal was to add more fabricators, but the opposite happened. Cain said two longtime employees recently leave the company.

The departures left him with three craftspeople at a time when he needed a total of nine to keep up with the demand. Last year, he said, was his best sales year ever.

“I have a labor-based business ... I lose two of them that’s 40% of my workforce,” he said. “I was in a bad position when those two people left. We have less things going out the door every week.”

A bottleneck in production soon developed. He said people are willing to wait about four weeks for a custom, handmade countertop or range hood for their home. “But if they have to wait eight weeks, then they don’t order,” Cain said.

Cain has scheduled an online auction this month for about $100,000 worth of metal shop equipment.

Brown, of the county Economic Development Board, and other local business experts said the low unemployment rate, coupled with the county’s high cost of living, is greatly affecting businesses that hire entry-level workers, including those in hospitality and retail sectors.

“We’re losing our entry-level workers. They can’t afford to live here,” Brown said. “It’s very difficult to keep someone who would make minimum wage for a year or two before they move to a higher-level position.”

Sonu Chandi, president at Chandi Hospitality, which owns restaurants and develops Mountain Mike’s Pizza throughout the North Bay, said the base pay for much of the area’s service industry is what would be considered entry-level.

”We’re seeing a crunch in that, definitely,” he said. “I think we’re starting to feel that, where it’s becoming overly competitive.”

Kathy Goodacre, executive director of Career Technical Education Foundation, said the current focus and demand on construction and trades workers may be impacting the hospitality and retail industry both in terms of supply and wages.

“Most construction, and even some local manufacturers are starting entry level jobs with no experience or training in the range of $18/hour,” Goodacre said in an email. In contrast, she said, hospitality workers enter the workforce at between $12 and 14 an hour.

Peter Rumble, CEO of the Santa Rosa Metro Chamber of Commerce, said businesses with fewer financial resources and profit margins will face challenges when workers have more options.

“It’s hard right now,” he said. “But I’d rather have these challenges than an economy where you can’t start up a business at all. I’d rather have virtual unemployment than double-digit unemployment.”

Rumble agreed businesses’ efforts to recruit, train and retain employees is exacerbating local labor shortages.

“I know our downtown businesses are challenged to find people that stay for a long time, frankly,” he said. “We know that it’s difficult for large employers to recruit people to the area. Everybody is looking for really talented people.”

Cain said he could have downsized the company and laid off employees, but that would have meant he would’ve had to do more work to compensate for the loss of employees. Instead, Cain now serves as president of a Palo Alto startup called Makers4Good, a group that helps create partnerships between nonprofit organizations and designers, e-tailers and manufacturers.

Cain said he couldn’t find anyone to purchase Mio Metals and keep it running. He said his key employees “found jobs better than the one they had with me.”

Alejandro Lopez said he’s trying to get a job at a welding shop in Santa Rosa. But he’s not looking forward to commuting from his home in Petaluma.

He said he loved his work at Mio Metals. He said he would wake up every day and always look forward to his workday.

“I like doing work with my hands, building something pretty,” Lopez said. “I’m definitely going to miss it.”

You can reach Staff Writer Martin Espinoza at 707-521-5213 or martin.espinoza@pressdemocrat.com. On Twitter @pressreno.

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