State’s Payrolls Bounce Back in May

Employment in California rebounded nicely in May after two months of losses, at least temporarily quelling fears that the state’s economy was slowing too much.

Payrolls grew by 14,800 jobs, the state Employment Development Department reported Friday. The unemployment rate, which doesn’t always parallel the payroll data, ticked up to 5% from 4.9% in April.

Earlier reports had created an atmosphere of foreboding. In March and April, the state lost a net total of more than 18,000 jobs -- quite a change from the robust average monthly increase of 25,000 in booming 2005.

Most analysts have been predicting an economic slowdown, the result of higher oil and gas prices, higher interest rates and a cooling housing market. But there’s a point at which an economy moves so slowly that it stumbles, and some feared that was in sight.

The same categories that fueled much of last year’s employment growth also triggered the early spring’s decline: construction and related industries. That left economists to wonder whether the job losses stemmed from heavy spring rains that shut down home-building sites, or were instead a sign of deeper trouble in the housing sector -- a grim portent for the economy as a whole.

Howard Roth, chief economist for the state Finance Department, said Friday that he was relieved to find that the weather apparently did play at least a limited role. Construction picked up 3,700 jobs in May after dropping more than 17,000 in the previous two months.

Equally significant, the weakness in construction didn’t appear to be migrating to other sectors.

“The broad gains we saw today were heartening,” Roth said. “It was spread around everywhere, just the way you want it.”

Eight job categories rose in May, including construction, manufacturing, government, financial and transportation. Only three declined, including leisure and hospitality.

Sean Snaith, director of the Business Forecasting Center at the University of the Pacific, concurred that the May report involved unexpected good news.

“We got a little soggy in March and April -- pun intended -- but May provides evidence of an economy that is still growing pretty strongly,” Snaith said. “We know housing is going to decelerate, but we have some other pistons that have been firing over the last year.”

Foremost among them are professional and business services, which have gained 63,200 jobs since May 2005. Manufacturing fell by 1,900 jobs during that time, continuing a long-term nationwide falloff. Information, a category that includes publishing, also fell by 1,900 jobs.

Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto, was a little less sanguine than his peers. One OK month and two bad months, he pointed out, added up to a pretty lackluster quarter.

“We’re in the third month of an economic slowdown in the state and the nation, and I expect it to continue,” he said.

Housing prices in the state will soon start to show year-over-year declines, Levy predicted.

“I don’t think there’s going to be a collapse, although I expect more impact on prices than most of the optimists,” he said.

A housing slowdown has other costs besides job losses in the sector. Economists note that if homes decline in value, people feel less wealthy -- which means less consumer spending, which drives about two-thirds of the economy.

The more this cycle builds in intensity, the weaker the economy becomes.

The state’s highest unemployment in May, 13.4%, was in agricultural Imperial County. The lowest was Orange County, with 3.2%.

Los Angeles County had a rate of 4.9%, while in Ventura County it was 3.8%. The rate was 4.2% in Riverside County and 4.3% in San Bernardino County.

The payroll data are based on employer surveys and don’t include farmworkers and people who are self-employed.

The unemployment rate is calculated by surveying households. By this measure, employment increased 43,000 during the month, three times as big as the payroll jump.

Why there is so often a difference between the employer and household numbers is a puzzle to economists. The self-employed account for some of the difference, and another factor may be people working in the unregulated “shadow” economy.