California's economy sent out mixed signals in July: The unemployment rate inched up, but employers still added 38,100 jobs, one of the biggest gains for the state since the recession officially ended in February 2010.
The jobless rate ticked up to 8.7% from 8.5% in June, according to data released Friday by the state Employment Development Department.
The net gain in jobs, especially in higher-paying industries such as professional and business services, was a positive sign for a state that has steadily added more jobs over the year and outpaced the nation in growth.
Less important is the jobless rate, economists said, because that is derived from a highly variable survey that fluctuates month to month. Of greater potential concern are the 36,000 people who dropped out of the state's labor force last month, a signal that job seekers were discouraged and gave up looking for work.
"There is good news and bad news," said Esmael Adibi, director of Chapman University's A. Gary Anderson Center for Economic Research. "This was the best job gain for the year. But the fact the labor force is going down is worrisome."
The Golden State's job report also reflected some conflicting signals in the national economy.
The U.S. unemployment rate dropped to 7.4% in July, but that cheery news was driven in part by a decline in the labor force and a rise in part-time workers who wanted full-time work. California nabbed nearly a quarter of the 162,000 net job gains in the country last month.
"We continue to run ahead of the nation, but the same dynamics are in play here, including a higher concentration of part-time and contingent employment," said Michael Bernick, former head of the state Employment Development Department and a Milken Institute fellow who studies labor markets.
Also on the negative side: Consumers, who have been a big force in pushing the country's economic recovery, appeared to be reining in spending as they grappled with high gas prices, continuing effects of the payroll tax hike and a job market that is still challenging.
A University of Michigan and Thomson Reuters index showed that consumer sentiment unexpectedly fell in August from a six-year high the month before. This week, major retailers including Macy's and Wal-Mart Stores Inc., considered an economic bellwether, reported earnings below expectations and slashed their outlooks for the rest of the year.
An estimated 100,000 Californians also are missing out on the final tier of federal unemployment extension benefits, a cut that went into effect after the state's jobless rate fell below a three-month average of 9% in June.
That's a big headache for Benjamin Ochoa, 55, who lost his job as a landscaper last year. The Los Angeles resident said companies tend to hire younger workers who have more physical stamina, and his unemployment benefits are a lifeline that he'll lose soon.
"There's so much competition out there for jobs, and I just don't have that much savings," Ochoa said. "I'm not sure what I'm going to do."
Many economists say that California is poised to continue its steady recovery for the rest of the year.
An end to the recession in Europe and a pickup in the Japanese economy will boost the state's export business, said Lynn Reaser, an economist at Point Loma Nazarene University. A rebounding housing market has also helped Californians feel wealthier, she said.
Friday's job report showed that gains were notched in seven sectors. That includes a broad range of fields including manufacturing, with a gain of 2,500 jobs, and educational and health services, with a 6,600 increase. Improving tourism helped leisure and hospitality nab 5,200 new positions. And professional and business services enjoyed the biggest jump, adding 15,000 jobs last month.
Brett Good, a senior district president for staffing firm Robert Half International Inc., said demand has picked up for college-educated professionals with at least a few years of job experience in areas such as digital media, accounting and technology. He said some workers are getting multiple job offers and receiving retention bonuses.
"It's nothing that you would constitute as the go-go days of the dot-com era or before the financial crisis meltdown, but it's slow, steady progress," he said.
One area of disappointment was construction, which shed 7,300 jobs in July, the largest drop of any industry. Although the housing market has rebounded sharply this year, builders were caught off-guard by the speed of the recovery and many are still dealing with tight access to credit and lack of available lots and skilled labor.
For July, counties in Southern California on the whole showed a net loss of jobs.
Los Angeles County shed 30,400 nonfarm jobs, and unemployment rose to 9.9% from 9.7% in June. The government sector showed the biggest drop with 42,300 lost jobs. Education and health services notched a 3,600-job decline, which can partly be blamed on the summer break. Manufacturing was down 1,200 jobs.
San Diego County lost 10,900 positions, and its jobless rate rose to 7.8% from 7.4% the month before. Orange County dropped 10,200 jobs and its unemployment rate increased to 6.5% from 6.1%.
The Inland Empire, which includes Riverside and San Bernardino counties, saw 20,900 jobs disappear. Its unemployment rate rose to 11% from 10.3% in June. The losses were concentrated in government, educational and health services and financial activities.
The Bay Area, including San Francisco, San Mateo and Marin counties, lost 1,800 jobs. Unemployment rose to 5.7% from 5.6% in June.
Many of the long-term unemployed say they have seen a pickup in the number of job postings, but note that employers are increasingly picky.
Take the case of Hermine Majarian, 25, who found and then lost her first job out of college in April, all within the space of a month. Majarian, who graduated in 2009 from Glendale Community College, said her company was unwilling to provide much training to her as its office assistant. When she floundered, the company simply fired her.
"There's so many people looking for work, if they don't like you, then they won't bother trying," the Glendale resident said.