California unemployment rate rises to 12% in July


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California’s unemployment rate increased in July while job creation slowed to a crawl, fueling fears that the state’s fragile recovery is faltering.

Last month’s unemployment rate ticked up to 12% from 11.8% in June, according to figures released Friday by the state Employment Development Department. California now has the second-highest rate of unemployment in the nation, trailing only Nevada at 12.9%. Its jobless rate is well above the U.S. average of 9.1% in July.


The hiring picture was particularly bleak. California employers added just 4,500 new jobs last month, a steep drop from the revised 30,400 jobs added in June.

Interactive: Unemployment, state by state

Though pockets of the Golden State are doing well, including San Diego’s bio-sciences companies and Bay Area start-ups, weak consumer demand and employer skittishness have curtailed growth in the Central Valley, Inland Empire and Los Angeles. Los Angeles County’s unemployment rate rose sharply to 12.4% in July from 12% in June.

“The California economy is treading water. It’s growing but not fast enough to create net new jobs,” said Scott Anderson, the senior economist at Wells Fargo Securities. “The recent knock in consumer and business confidence could be enough to tip California back into recession.”

More than 2.1 million Californians are unemployed; one-third of them have been jobless for a year or more.

Economists said California was performing worse than the nation largely because of its real estate hangover. When the property bubble burst, it wiped out 1.3 million jobs, many of them in construction, real estate and mortgage-related financial services.


The state’s fiscal woes are also proving to be a drag on employment. The public sector is a major employer in California, which in the past has acted as bulwark during tough times. But deep budget cuts are forcing many agencies to shed workers this time around.

California’s economy is largely dependent on national and even international developments, said Jerry Nickelsburg, an economist specializing in California with the UCLA Anderson Forecast. “California is inextricably linked to the rest of the U.S. economy,” he said.

There’s no quick fix that state officials can use to make up for all the jobs lost in the downturn, said economist Esmael Adibi of Chapman University in Orange.

Even Gov. Jerry Brown, who this week appointed a retired banker as his top jobs advisor, can’t do much to boost the economy in the short term, apart from creating a more business-friendly atmosphere that encourages investment, Adibi said.

Brown and his spokesmen declined to comment on the latest economic data.

Though net jobs grew modestly in eight of 11 industry sectors, employment declined in three areas: trade, transportation and utilities, financial activities and government, the Employment Development Department said.

Government, which has been battered by state and local budget cuts, posted the worst performance, losing 5,800 jobs in July.


Public sector layoffs are masking some of gains made in the private sector, even in hard-hit construction, manufacturing, tourism and health care, said Nancy Sidhu, chief economist for the Los Angeles Economic Development Corp.

As a result, “the best that can be said about July is that recovery paused to take a break,” Sidhu said. “And I’m not sure what August will bring. Certainly, there have been a lot of fireworks in the financial markets, and that suggests that there could be another pause.”

Those pauses, combined with a shaky stock market and a European debt crisis, portend extremely slow economic growth at best for the nation and California, analysts said.


Interactive: Unemployment, state by state

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-- Marc Lifsher