Housing woes hit jobs in state
What the housing boom giveth, the bust taketh away.
The slump in California’s once-effervescent real estate market is taking its toll on jobs, a state report released Friday showed.
Mounting losses in construction and financial services -- the two sectors most dependent on home building and sales -- contributed to the second increase in the state’s unemployment rate in two months.
The rate rose to 5.2% in May from 5.1% in April, the California Employment Development Division said.
By comparison, the rate in May 2006 was 4.9%.
The uptick further widened the gap between the state and national jobless rates, the latter of which held steady in May at 4.5%.
The divergence illustrates the relatively large role real estate has played in California’s economy in recent years. Superheated housing markets from the San Francisco Bay to Beverly Hills pushed prices up faster and higher in the state than almost anywhere else in the country, putting the shine on the Golden State’s recovery from the last recession.
“Housing was a really big part of our economy,” said Howard Roth, chief economist at the state Department of Finance. “Housing carried us for quite a while there, and it even made the recession milder. Some years housing accounting for 40% of the growth in jobs.”
Having that much of the state’s economy tied up in a hot market meant there was that much more to lose when it cooled. That was apparent in the financial activities sector, which recorded the greatest loss, on a nonseasonally adjusted basis, in May, down 1,100 jobs.
Many of those were the result of layoffs by troubled sub-prime mortgage lenders.
The construction sector posted the loss over the previous year, down a seasonally adjusted 6,700 positions. Specialty trade contractors -- the construction workers who put the finishing touches on a home -- were hardest hit, losing 5,200 jobs over May 2006.
Stephen Levy, director of the Center for Continuing Study of the California Economy at Palo Alto, said that the economy appeared to be slowing and that latest job report was another piece of evidence that “the housing downturn is for real.”
The uptick in the jobless rate is an indication that the workforce was growing at a faster pace than jobs. Indeed, the state’s employers added 10,800 jobs in May after a revised gain in April of 4,800 jobs. A separate survey of households showed the number of Californians holding jobs in May rose 18,000 over the previous month. The household survey tends to show more employment because it picks up casual and off-the-books work.
The number of Californians unemployed in May was 944,000, up 10,000 over April and 65,000 over a year earlier.
“The unemployment rate has risen enough now to be considered a real trend,” Levy said. “Since population growth is slowing, the data -- if real -- indicate that people have come back into the labor force [at] higher participation rates during the past 12 months.”
Although construction has been shedding jobs since the sector’s peak employment late last year, UCLA Anderson Forecast economist Ryan Ratcliff said the losses had been more gradual than in past housing slowdowns. Ratcliff said the UCLA forecast group continued to view this slowdown differently than past cycles in one other significant way: They don’t expect it to push the economy into recession.
That’s because, unlike past housing downturns, this time there are no other sectors poised for a decline.
“Our rule of thumb is you need two separate sources of weakness,” he said. “So if you have only one, the scenario looks much more like a near-miss than a full-blown recession.”
The state figures showed that several sectors that have been fueling California’s job engine remained strong: Job gains were seen in education and health services, the leisure and hospitality category and government.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., found a bright spot in the report, noting that the area added 4,000 jobs in television and motion picture production in May compared with a year earlier.
