State jobless rate at 7.7%
California’s unemployment rate held steady at 7.7% in September, remaining at its highest level in 12 years. Economists warned Friday that joblessness is likely to jump once October numbers are tallied.
The new data from the California Employment Development Department reflect a continually weakening state economy buffeted by falling home prices, little construction activity, declining consumer demand and government belt-tightening.
The paralysis in housing and lending has been particularly tough on Kathleen Thompson-Boons, 59, of Watts. She lost her job as a loan funder a year ago. “Every day I’m on the Internet, sending out my resume,” she said. “But nothing comes out of it. I’ve only had one interview.”
Now she says she’d be satisfied to land a $10-an-hour job doing medical billing or retail sales, if she could find one.
What the new state numbers did not show was the effect of a global financial crisis that froze credit and panicked stock markets beginning in mid-September, just after the monthly employment surveys were conducted.
“The economic situation has deteriorated dramatically in the last month, and, unfortunately, I think the snowball is gaining momentum,” said Sung Won Sohn, an economist at Cal State Channel Islands. “It’s going to get worse.”
Sohn, who also is vice chairman of clothing-store chain Forever 21 Inc., predicted that October’s figures would show “significant layoffs” in financial services and retail trade. “Most retailers expect this holiday shopping season to be at best flat in dollar terms and be down in volume terms,” he said.
One major retailer, the Mervyns department-store chain, announced Friday that it would mark the upcoming holidays with a going-out-of-business sale. The Hayward company is closing 149 stores, mainly in California, and eliminating more than 10,000 jobs.
Perhaps heralding a grim sales season, a Reuters/University of Michigan survey, released Friday, showed a record single-month drop in consumer confidence in October.
The index buttressed a report Thursday from the federal government that retail sales fell 1.2% in September, the most severe decline in three years.
Retail’s poor prospects could further weaken a state economy that lost 77,200 jobs between September 2007 and September 2008, according to the Employment Development Department. The biggest declines were in construction; financial activities, including the mortgage industry; and manufacturing.
Economists credited much of last month’s leveling-off to the seasonal return of thousands of teachers to school and university classrooms.
The jump in education work contributed to a statistically insignificant drop in unemployment in the Los Angeles metropolitan area, to 7.8% in September from 7.9% in August.
One sure sign that consumers might be acting a little Scrooge-like at Christmas is a slowdown in container traffic in September at the ports of Los Angeles and Long Beach, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. Although volume jumped from August to September, reflecting the arrival of imports for the holidays, it was 12% below September 2007’s totals.
“If the stores were honest, they would tell you they wish they hadn’t placed a lot of those orders,” Kyser said.
The bad news out of the shopping malls is evidence that “California is moving from a housing-driven slowdown to a consumer-driven recession,” said Stephen Levy, director and chief economist at the Center for Continuing Study of the California Economy in Palo Alto.
Consumers, he said, “are being hit with a triple whammy of rising job losses, sharp drops in their housing and stock-market wealth and tightening access to credit.”
As a result, California could wallow in the economic mud for much of next year, with unemployment possibly hitting 9%, Levy said.
California’s economy can’t grow without credit and people eager to buy new cars, home furnishings and high-end electronic equipment, said Howard Roth, chief economist for the state Department of Finance.
“It’s worrisome,” he said. “If you lose the consumer, there’s not enough there to keep the rest of the economy going.”
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