California's unemployment rate fell to 7.2% last month--its lowest level in 4 1/2 years--as the state gained a healthy 17,900 jobs and kept its much-welcomed economic recovery on track, government officials reported Friday.
The state's progress came despite a modest and slightly disappointing increase of 121,000 jobs nationally in September, leaving the U.S. unemployment level at 5.6%, unchanged from August.
"The national picture is one of moderate growth--certainly no boom, but a steady-as-she-goes performance," said Lynn Reaser, chief economist of First Interstate Bank in Los Angeles.
But Reaser said that in California, where the unemployment rate declined from 7.8% in August, "it appears as though we're picking up momentum."
Even Los Angeles County, which suffered the brunt of the devastating job losses that began in California in mid-1990, showed signs of improvement last month. The county's jobless rate--which, unlike the federal and state figures, is not adjusted for seasonal trends--fell to 7.5% in September, from 8.6% in August.
Analysts, though, were quick to caution that hard-hit Los Angeles County's figures tend to be volatile because of the small statistical sampling from which they are calculated. They added that while California has now shown job increases for eight months in a row, the county's performance has been inconsistent.
In Los Angeles, "it doesn't appear as though we're seeing strong employment growth in any of the major industries," with the possible exception of entertainment, said Vincent M. Canales, labor market analyst for the California Employment Development Department.
Some economists were hopeful, however, that the improvement in much of the rest of the state will pull Los Angeles along. They said the state is being helped by growing strength in tourism and international trade, along with entertainment--industries that are prominent in Southern California. Likewise, the job losses in the aerospace industry, which played such a big role in Los Angeles' slump, are slowing.
California "is beginning to enjoy its long-run strengths again," said Tom Lieser, associate director of the UCLA Business Forecasting Project.
This year, California, with 12% of the U.S. population, has accounted for 22% of all the jobs created nationally.
All the same, the state has a long way to go before it catches up with the rest of the country. Among the 11 big states whose jobless rates were released by the government Friday, California continued to have the highest unemployment.
Next came New York, at 6.8%, and Pennsylvania, at 6.4%. The lowest rates were posted by North Carolina, at 4.7%, followed by Michigan, 4.8%, and Ohio, 5.2%.
Economists said part of the reason California's job growth appears to be outpacing the nation's is that the state has so much further to go before approaching a healthy level of employment. "We're at an earlier stage of the recovery," Reaser said.
"Whereas in some areas of the country companies are being constrained by labor availability, that's not the issue in California," she added.
Likewise, analysts said, California consumers are just beginning to open up their wallets again, while consumer spending nationally bounced back several years ago.
All told, California has added an average of 13,700 jobs a month this year. Even so, the number of workers on employers' payrolls in the state is down 222,100 from the all-time high of 12.5 million in July, 1990.
Last month's jobless level was the state's lowest since February, 1991, when the rate also stood at 7.2%. A year ago, the rate was 8.3%.
Nationally, the jobless rate now has hovered in the 5.6%-to-5.7% range since May. After gaining an average of 294,000 jobs a month in 1994, the nation is showing monthly increases of 148,000 for the first nine months of this year.
Still, Reaser noted that the increase picked up in the most recent quarter. She cited the average monthly gains of 137,000 in the July-September quarter, versus increases of 82,000 from April through June.
"The economy is growing slowly but not falling apart by any means," said Joseph A. Wahed, chief economist for Wells Fargo Bank in San Francisco.
Even so, Wahed said the latest job figures will encourage the Federal Reserve Board to consider easing interest rates further in coming months. "We're approaching the time when something will have to be done to stimulate the economy," he said.
At the board's most recent meeting last month, it decided to leave short-term interest rates unchanged. In July, the central bank lowered interest rates for the first time in nearly three years to try to boost the economy.
Wall Street reacted indecisively to the unemployment reports. Long-term bond yields, which fell to 20-month lows in recent days in anticipation of the employment figures, were mostly unchanged Friday. The Dow Jones industrial average finished the day at 4,769.21, up 6 1/2 points.
The modest rise in payroll jobs last month was led by a gain of 106,000 in the service sector, reflecting increases in such areas as temporary employment and health care services. But employment in manufacturing declined by 32,000, representing continued weaknesses in defense spending and declines in automobile manufacturing, apparel and printing and publishing.
"The job market picture was essentially static--the overall employment and unemployment picture changed very little in September," said Katherine G. Abraham, commissioner of the federal Bureau of Labor Statistics, appearing before Congress' Joint Economic Committee.
The employment reports also contained a few statistics suggesting a more buoyant job market: The average work week lengthened, factory overtime rose and average hourly earnings, after falling 2 cents in August, increased by 4 cents in September, to $11.52.
Separately, the Commerce Department said wholesale inventories rose for the 14th straight month in August, a sign that companies were still struggling to work off stocks of excess goods.
Friday's reports followed recent indications that the economy was regaining momentum after growing at a slow 1.3% rate in the second quarter, its weakest quarterly performance in more than two years.
Rosenblatt reported from Washington and Silverstein from Los Angeles.