Why Jobless Rate Stays Low in State Despite Big Layoffs
Something funny is going on here. We keep hearing about big layoffs in defense, in construction, in semiconductors. So why is California’s unemployment rate still below the national figure--and still near its 20-year low?
It has to do with demographics, the study of population trends that spews out enough statistics to fill a warehouse. And what some of those statistics are suggesting is that as job growth shrinks, so does the number of people who want to work.
Whether it’s an anomaly or a trend is still open to debate. It is clear that immigration to California both from abroad and elsewhere in the United States has slowed in the past two years. During the 1980s, immigration provided the state with a seemingly limitless supply of young adults seeking work. That has helped California avoid the shortage of young workers that hurt other areas of the country.
Meantime, more and more people in their 50s and 60s are leaving work, taking sweetened early retirement packages that their employers offered as a way to avoid forced layoffs. So far, most of these early retirees have been middle-class white men in either professional or skilled blue-collar positions.
Also, some women who went to work in the 1970s and 1980s seem to be opting out of the job market, especially during child-rearing years. It’s not clear, however, how many are doing this. The evidence is conflicting.
All this is so new that most economists and demographers don’t know what to make of it. Is it a momentary blip? It might be, especially since members of the new baby boom of the last 15 years will begin entering the job market in the next few years. And after the state economy struggles through a couple of bad years, growth will likely resume in California. That will probably bring in a whole new wave of immigrants.
But what if it is a long-term phenomenon? More women are choosing to stay at home instead of returning to work immediately after giving birth, citing the strain of being on the career track and the “mommy track” at the same time. The economic and personal rewards of working while your children are small no longer seem as worthwhile. And early retirement could be increasingly attractive to aging baby boomers who “top out” in their careers and expect no more promotions or big raises. Why work if you have little to gain?
We may have to flip a coin at this point to guess which answer will prove correct.
The number of people working in California is growing at a much slower clip than it was as recently as a year ago. The increase has been a minuscule 2% this year. The percentage was nearly twice that a year before. Yet there hasn’t been a big increase in unemployment, at least so far. The state unemployment rate was 5.4% in August, compared to 5.1% for all of 1989. Most forecasts expect a steady climb in the jobless rate through next year, but not a dramatic jump.
Until now, California didn’t reflect the national trend. Statistics show that growth in new jobs for the nation as a whole is slow, but growth in the number of those seeking work is even slower. That seems to be holding down the unemployment rate, for now. Economists say the national trend can be traced to the “baby bust” of the 1960s, which has meant that fewer young people are entering the work force now.
California was insulated from that phenomenon by immigration.
During the 1980s, California received an average of about 300,000 immigrants per year. About 70% were adults, and more than 80% were from other countries. Most of the immigrants who have arrived in California recently have come looking for work.
“Without migration, our labor force growth would have been small,” wrote Nancy Bolton, a demographic consultant to the UCLA California Business Forecasting Project, in a recent report.
What fueled the California boom of the last decade was a giant increase in jobs as the state’s industrial base diversified, coupled with an increase just as large in the number of people who wanted to work here. And most of those were immigrants.
Now, however, something else seems to be happening. The state has become much less attractive to young adults in other parts of the country and even to many of the young adults already here. They are the people who, more than any others, move the job market.
“They are more inclined to move out of the state if they’re here and less inclined to come if they aren’t,” said Kevin McCarthy, a demographer at RAND Corp., the Santa Monica think tank. The economic climate doesn’t seem as favorable to them, he said, in part because of slackening job growth and competition for jobs from foreign-born immigrants.
“Had it not been for (foreign-born) immigrants,” McCarthy added, “the job situations in San Francisco and Los Angeles would have looked a lot more like the declining cities of the East.”
What this means is that California’s relatively low unemployment rate at present ought not to be a source of pride or comfort. It may, instead, reflect a troubling vote of no-confidence by both younger and older workers.
Fewer young workers entering the job market may signal that some no longer view California as a land of economic opportunity. And the significant rise in early retirement could be seen as a decision by older workers to opt out now rather than risk layoffs or reductions in benefits if the economy really goes sour.
