State Jobless Rate Highest in 7 Years : Economy: California’s 8.2% unemployment is well above nation’s 7%. Report fuels fears region’s recession could last for months even as other areas see recovery.
Fueling fears that the state’s recession could last for months, California’s unemployment rate shot up to 8.2% in June, its highest level in seven years and well above the national rate of 7%, the Labor Department reported Friday.
Overall, the new report painted a gloomy picture of California’s economic landscape at a time when other regions cite the rustlings of recovery. Of the 50,000 jobs lost nationally last month, more than 20% were lost in the Golden State, mainly in the troubled sectors of manufacturing, construction and retailing.
“Basically, the California news is crummy,” said Jack Kyser, chief economist with the Economic Development Corp. of Los Angeles County.
California’s jobless rate leaped from 7.7% in May. Nationally, the rate edged up from 6.9% the month before. Among major states, only Massachusetts and Michigan had higher unemployment rates than California, respectively reporting 9.5% and 9.1%.
“The U.S. economy may be getting ready to turn around,” Kyser added, “but it’s going to be late this year before you get any decent news on the California economy. For the local Los Angeles economy, it may be well into 1992.”
The recession hit California several months after it emerged nationally last July, and it continues to damage various elements of the economy even as it gives signs of winding down elsewhere. The new government statistics buttress evidence that the slump may persist for months in California, economists said Friday.
An analysis at First Interstate Bank, for example, found that state employment levels in agriculture, manufacturing, construction and a group of industries including finance, insurance and real estate all are lower than a year ago. This unusual decline arises from problems such as the drought and freeze hurting agriculture, defense cutbacks, overbuilt construction and related problems affecting finance and real estate.
“California has had some very region-specific problems,” said Ken Ackbarali, a senior economist with First Interstate Bancorp in Los Angeles. “We’re at least four or five months away” from a recovery, he said.
Because the recession came late to California, some now see logic in its hanging around months after it lifts in other places. The White House and many private economists have said the national slump is over, although that view is not universally shared.
“In California, we started the recession later than the rest of the country, and we’re going to start the recovery later than the rest of the country,” said Joseph A. Wahed, chief economist at Wells Fargo Bank in San Francisco.
By one measure of employment, California gained in June. Total civilian employment, a catch-all category that includes the self-employed and some unpaid workers, rose 15,000 last month to reach a total of 13.5 million workers.
But economists focused on the category of wage and salary employment, which, on balance, declined by 11,100 last month, despite gains in service and government jobs, according to the state Employment Development Department.
Manufacturing was hit across a wide spectrum, losing 10,300 jobs on a seasonally adjusted basis. The manufacturing cuts occurred in aerospace, metals and lumber, as well as makers of such “nondurable” products as food, textiles and paper. Besides manufacturing, other big job losers were construction, which was down 4,200, and retail, down 3,400.
Taken together, finance, insurance and real estate declined by 1,300 jobs, officials reported.
“Virtually every manufacturing industry laid off people in the month of June,” said Wahed. “I don’t like the numbers.”
State officials on Friday released various numbers that pointed to continued economic weakness.
More than 1.2 million Californians were unemployed last month, compared to more than 1.1 million in May and 759,000 a year ago. In addition, the line to apply for jobless benefits got longer in June, after declining in April and May from the peak month of March.
First-time unemployment claims totaled 74,361 during a sample week last month, up from 65,405 in May.
Looking ahead, some worry that emerging problems could slow the long awaited recovery in California. Impending state sales tax hikes, as well as other levies under discussion in Sacramento, could erode people’s purchasing power later this year. Also, some predict that problems in construction and real estate could last for many months, particularly if worried California bankers shy away from providing the credit needed to finance certain transactions.
Such problems may be especially acute in Los Angeles, said Kyser, former chief economist with the area’s chamber of commerce. “You know that the job losses for construction are going to continue.”
Yet, for all the trouble signs, some analysts pointed out that weak statistics from the labor market are common at the end of a recession. As business gradually begins to pick up, people resume searching for jobs, but employers initially remain cautious about hiring.
“At this point in the business cycle, there’s going to be a lot of mixed indicators, a lot of pluses and minuses,” said Pauline P. Sweezey, chief economist at the California Department of Finance. “Obviously, the unemployment rate went up more than I anticipated, but it might go down next month.”
