7.1% Jobless Rate Reflects Calif. Economic Slump

In a sign of deepening economic woes, the ranks of jobless workers in California grew by 60,000 in December, pushing the state’s unemployment rate above 7% for the first time in nearly five years, according to statistics released Friday.

The state Employment Development Department said that the rate rose to 7.1% in December from 6.7% in November, due largely to rising aerospace, construction and manufacturing layoffs and to retailers’ hiring of fewer than expected seasonal workers. The state’s jobless rate is expected to worsen in the coming months, weakening demand for goods and services, which could trigger even more job losses.

It was the second month in a row that California’s jobless rate was higher than the national rate, which rose to 6.1% in December from November’s 5.9%.

Although the monthly figures are highly volatile, analysts said the steep and steady increase in the state unemployment rate since June’s 4.9% is indicative of the state’s worsening economic condition.

“We are sort of alarmed at the rate we are going up,” said Adrian Sanchez, a regional economist at Security Pacific National Bank. “Clearly, the pace of the recession seems to be accelerating. We still think it will be mild. But it looks like it may be deeper than we were originally anticipating.”

Although economists have shied away from predicting that California will suffer more than the nation as a whole in the current recession, the state’s bleak unemployment figures “certainly lend credence to those who make those statements,” Sanchez said.

The state’s December figures showed that more than 1 million Californians were out of work, nearly half of whom had been laid off. Meanwhile, on a seasonally adjusted basis, the number of jobs--excluding those in agriculture--fell by nearly 15,000 from November levels to about 12.8 million. Since July, the state has lost nearly 100,000 jobs.

The decline in jobs in December is “not an awesome job loss, but it is certainly consistent with what we have seen since the summer,” said David Hensley, a UCLA economist who follows the California economy. “The unemployment rate is starting to be alarming because it is marching up steadily.”

Construction and manufacturing, particularly aerospace, continued to be hard hit. Compared to December, 1989, the construction industry has lost nearly 30,000 jobs as home sales fell and new development dropped off. Manufacturing saw about 53,000 jobs disappear, many of them in the aerospace industry, which has been shaken by defense cutbacks and the winding down of some key programs.

The rise in unemployment occurred at a time of year when jobless rates normally fall. “Traditionally, you see big employment gains in November and December because the retailers were gearing up for the holidays,” said Frederick L. Cannon, a senior economist at Bank of America.

Retailers did hire more workers than in 1989, but they hired fewer than expected and not enough to offset job losses in other industries. In fact, the number of retail jobs, on a seasonally adjusted basis, fell 16,200 from November levels to 2.2 million workers in December.

“What you have seen is that employment growth in the state has started off fairly strong, but, as we proceeded over the year, it has dropped off,” said Jack Kyser, chief economist at the Los Angeles Area Chamber of Commerce. “The aerospace layoffs were really beginning to hit at the end of the year.”

Economists predict that the California unemployment rate will continue increasing in the first half of 1991 and may reach 8% in worst-case scenarios. “The next couple of months will be kind of unpleasant in the state as far as the unemployment rate goes,” Kyser said.

The rapid rise in the rate has forced many economists to revise their jobless estimates upward. Sanchez at Security Pacific, for example, said the bank may increase its predicted peak unemployment rate to 7.5% from 6.5%.

The last time California’s unemployment rate rose above 7% was in February, 1986, when it hit 7.3%. The rate fell into the 6% range before briefly rising to 7% in July, 1986. Since then, the monthly rate has fallen to as low as 4.6%.

In releasing the state figures on Friday, Employment Development Director Alice Gonzales criticized a federal report released Thursday that said a deep recession could bankrupt the unemployment insurance funds in several states, including California.

“No one in this state should worry about being able to collect (unemployment insurance) benefits if or when they are needed,” Gonzales said in a statement.

At the end of 1990, the state’s unemployment insurance trust fund stood at $5.6 billion. During the year, the fund paid $2.1 billion to workers and received $2.4 billion in contributions from employers.