After outpacing the U.S. for most of last year, California’s jobs engine lost momentum in December as employers' payrolls shrank by 17,500 last month.
The unemployment rate remained unchanged at 9.8% last month, according to figures released Friday by the state’s Employment Development Department.
The loss of payroll jobs in December ends seven months of job growth in the Golden State. For much of the year, yearly job growth was hovering around 2% but has now dropped to 1.6%.
Economists called the jobs report disappointing. Some said job losses last month might have been caused by employers to hold off on hiring as Washington grappled with the "fiscal cliff," when year-end tax increases and spending cuts were set to take place.
Congress later reached a deal on the 'fiscal cliff,' but not before hampering business confidence, economists said.
“I believe businesses were very worried about the 'fiscal cliff' issue,” said Esmael Adibi, director of Chapman University's A. Gary Anderson Center for Economic Research. “I think this report reflects that.”
Eight industries recorded job losses in December, but the steepest decline was in the trade, transportation and utilities sector. Led primarily by losses in retail trade, that industry shed 11,200 jobs. Professional and business services, which includes white-collar occupations such as accountants and lawyers, shed 8,800 jobs.
Construction, which has been aided by a recovering housing market, added 4,100 jobs last month. The sector, which saw employment grow 4.4% over the year, has seen a turnaround as demand for multi-unit housing has flourished.
Education and health services added 9,200 jobs in December.
Some economists, however, were skeptical of the sharp drop in payroll figures.
“It’s important not to overreact because of the possibility of revision,” said Lynn Reaser, chief economist at the Fermanian Business and Economic Institute at Point Loma Nazarene University. “The loss of momentum at the end of the year is a concern.”
The report, however, contained at least one bright spot.
The labor force grew by almost 73,000 as more people re-entered the workforce, a sign people are encouraged once again to look for work.
Friday’s report also showed that November’s job figures were revised upward to show a net gain of 6,100 jobs.
Since December 2011, the state has added 225,900 jobs to its payrolls, the second largest yearly increase in the country.
Still, California’s jobless rate is among the highest. Only two states have a higher jobless rate: Nevada and Rhode Island, where unemployment is at 10.2%.
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