Jobs Gain Shows State’s Recovery Still on Track

Defying a national economic slowdown, California added 20,000 jobs in July, its biggest monthly gain since February and a signal that the state’s modest economic recovery remains on track.

The Labor Department also reported Friday that the state’s unemployment rate rose to 7.9% last month, up from 7.6% in June, but analysts said the rise reflected growing numbers of job seekers entering the work force rather than more layoffs.

Nationally, employers added a surprisingly scant 55,000 jobs to their payrolls, and the unemployment level inched up to 5.7% in July, from 5.6% the month before. The main culprit was manufacturing employment, which plunged by 85,000, its biggest loss in 3 1/2 years.

Wall Street’s response to the U.S. employment reports was mixed, with 30-year Treasury bond prices up slightly but the Dow Jones industrial average falling 17.96, to close at 4,683.46. While the weak employment statistics normally foreshadow continued low inflation, a reported 7-cents-an-hour spurt in hourly wages suggested the potential for rising prices and reduced the odds of the Federal Reserve’s cutting interest rates again soon.

In California, however, analysts were upbeat, particularly because July was the second consecutive month of healthy job gains. In June, the state added 17,400 jobs.

“We’re probably not creating jobs fast enough for everyone who wants one, but we’re chipping away” at the state’s economic problems, said Adrian R. Sanchez, regional economist with First Interstate Bank in Los Angeles.

“We were afraid that if the U.S. went into a pause, California would too, but these numbers suggest that California’s employment is growing very decently,” added Larry Kimbell, director of the UCLA Business Forecasting Project. “California looks like it can continue growing in the midst of a U.S. stall.”

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So far this year, California is averaging monthly job gains of just over 12,000, up from 7,900 a month in 1994, and the best rate since the boom year of 1989, when the state posted average increases of 27,000.

But for Los Angeles County, the news was disappointing and reflected the still-gloomy prospects of a region that continues to be punished by falling real estate values and defense-related layoffs.

The county’s volatile jobless rate--which, unlike the federal and state statistics, is not adjusted for seasonal trends--jumped to 8.4%, up from 7.4% in June, and the highest rate since January’s 8.9%.

The figures suggest that Los Angeles County’s job market, despite some encouraging reports in the spring, remains stagnant, said Vincent M. Canales, a labor market analyst for the California Employment Development Department.

“It just seems that there hasn’t been much change in the past 12 months or more,” he said.

Analysts said, in fact, that the county’s market is further threatened by recent layoffs of county employees, and the planned closing of the Long Beach Naval Shipyard. The county’s jobless rate in July reflected employment of 4.02 million, down 32,000 from June’s total, while the number of people without work rose 47,000 to 371,000.

Otherwise, however, California’s employment reports marked “a good performance in the face of a massive slowdown across the country,” said David Hensley, a regional economist with Salomon Bros. in New York. “I’m feeling better and better about California’s prospects, at least for continued modest growth.”

Hensley also noted that the state was continuing to add jobs despite the economic problems of Mexico and Japan, two of the state’s major foreign trading partners.

Part of the reason for the state and national job markets moving in opposite directions, analysts say, is that California still is struggling to recover from a slump that began in mid-1990 while the U.S. economy has entered a slow period after a couple of years of strong growth.

In addition, California may be benefiting from spending by businesses and consumers that was deferred when the state’s economic outlook was darker.

Also, although the state’s jobless rate climbed last month, it still is down from from 8.5% in May and 8.8% in July, 1994. The higher unemployment rate last month stemmed from an increase of 146,000 in the size of the California labor force. One explanation offered by analysts is that when the economy begins to recover, many discouraged job hunters who previously gave up on finding work start returning to the labor force.

But the national economy, which had been generating a robust 225,000 jobs a month in the first quarter of the year, has slowed significantly. The 55,000 increase was about half of what analysts had predicted, and down from a revised 250,000 in June.

Big declines in automobile and aircraft production figured heavily in the decline in manufacturing employment, which now has fallen 188,000 over the past four months. The average length of the factory workweek has dropped by nearly an hour since January, evidence that the previously torrid demand for manufactured goods has cooled.

All the same, most economists expect growth to pick up later this year, enabling the U.S. economy to avoid a serious slump even if the jobless rate continues to climb.

“The economy has shifted into a lower gear, but it’s still moving forward,” said U.S. Labor Secretary Robert B. Reich. “This is the 11th straight month where the unemployment rate has been under 6%.

Martin Regalia, chief economist for the U.S. Chamber of Commerce, expressed hope that “modest” growth would resume in the last quarter of 1995. The July jobless report was “not indicative of an economy that is going into a recession,” he said.

Prospects for the rest of the year point to “pretty weak growth,” said Dean Baker of the Economic Policy Institute, a liberal think tank. However, if housing purchases and spending for consumer durable goods--everything from cars to refrigerators--bounce back, the growth rate could improve, he noted.

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Across the nation, jobs expanded at a rate of nearly 300,000 a month last year, with the pace slowing to an average of 226,000 in the first quarter, and an anemic 69,000 in the current quarter, according to the reliable survey of business payrolls.

There were 125 million Americans working last month, and 7.6 million unemployed, according to the survey on which the unemployment rate is based.

Among the 11 big states whose unemployment figures were reported Friday, California continued to post the highest jobless rate. Next came New Jersey, at 6.8%, followed by New York, at 6.2%. North Carolina’s jobless rate, at 4%, was the lowest, followed by Ohio, at 4.8%, and Michigan and Illinois, both at 5.1%.

Rosenblatt reported from Washington and Silverstein from Los Angeles.