Job Figures Indicate State Recovery May Be Slowing : Economy: Rise in California unemployment runs contrary to recent indicators. Analysts are baffled.


California employers added a relatively skimpy 7,100 jobs over the last two months, the government reported Friday, suggesting that the state's modest economic recovery may be slowing.

The surprising job figures--which defy various other indicators portraying an improving state economy--also show California's unemployment rate leaping to 8.8% in November, from 7.8% the month before. Over the last two months, the state's job growth rate was barely one-third of what it was earlier this year.

Government officials reported relatively weak numbers for the U.S. job market, too, reflecting a national slowdown that threatens California's comeback. The U.S. jobless rate inched up one-tenth of a percentage point in November to 5.6%, while employers put a modest 166,000 more people to work across the country.

Those figures, along with dismal homes sales statistics released Friday, add to the mounting evidence that the national economy cooled off this fall after a strong showing this summer.

The news sparked more calls for the Federal Reserve Board to spur the economy by easing interest rates when its key policymaking committee meets on Dec. 19. By suggesting a lack of inflationary pressure in the economy, the employment statistics also lifted the bond market. Stocks, after moving up early in the day, finished mixed, with the Dow Jones industrial average falling 2.53 points to close at 5,156.86.

Trying to put the best face on the employment reports, U.S. Labor Secretary Robert B. Reich said they represented a graceful "soft landing" for the economy--and not a sign of recession. He noted that for the last 15 months, the national jobless rate has remained below 6%, a level once thought to be the "natural level" of unemployment.

"Two years ago, people would have said you couldn't do that without inflation, but today there's no sign of inflation," Reich said.

The California figures, particularly the rise in the unemployment rate, baffled analysts and led many to question their accuracy. "It's an unbelievable number," said Howard Roth, a senior economist with Bank of America in Los Angeles. "I don't have an explanation for it."


But even among the many analysts who believe that California's recovery remains on track, the drag of a declining U.S. economy is raising concerns for the immediate future.

For instance, Ted Gibson, economist for the California Department of Finance, said recent increases in sales tax revenues suggest that the state is actually gaining 25,000 to 30,000 jobs a month, far better than Friday's employment reports indicate.

Still, "the real concern I have is the national economy," he said, "We need a decent U.S. economy to keep our recovery alive. . . . The rest of the U.S. is an important market for California."

California officials noted that the state's November jobless rate, which hit its highest level since July 1994 when it also was 8.8%, is notoriously volatile because of the small statistical sampling on which it is based. Two months earlier, in September, unemployment rested at its low for the year, 7.2%.

Officials also pointed out that the state has gained 132,000 jobs over the past year, an average of 11,000 a month.

Moreover, other recent state economic indicators, such as personal income and retail spending, reflect improving business conditions. "California could show slower growth in the fourth quarter, but the trend is fundamentally one of continued recovery," said Tom Lieser, associate director of the UCLA Business Forecasting Project.

But shaking that favorable outlook for the state were Friday's figures showing a moderate increase of 9,200 jobs in November--and newly revised statistics reflecting a loss of 2,100 jobs in October.

In Orange County, the unemployment rate for October--the most recent monthly data available--was 5.2%, up slightly from 5.1% the previous month. Labor analysts said that the blip up was not meaningful. In fact, employers in the county added 7,100 jobs to their payrolls during the month. The county's November jobless rate, due to be released late next week, is expected to drop because of seasonal hiring in retailing and entertainment and because of gradually improving economic conditions.

Los Angeles County's jobless rate--which, unlike the national and state levels, is not adjusted for seasonal trends and thus is even more volatile--leaped to 9% in November from 7.5% in October. That was the county's highest reported unemployment since August 1994 when the level was 10.3%.

Vincent M. Canales, labor market analyst for the California Employment Development Department, said manufacturing employment remains weak in the county, but that the rise in the jobless rate misrepresents the current picture.

"We're going through what appears to be a pause," he said. "We're not seeing an improvement, but it's not getting worse."

Among the 11 big states whose figures were reported Friday, California's jobless rate remained by far the highest. Closest to California were Florida and Pennsylvania, where levels of 6.3% were posted.

The lowest unemployment rate was in North Carolina, at 4.2%, followed by Michigan and Illinois, both at 5%.

Nationally, joblessness has remained within a narrow range of 5.4% to 5.7% all year but employment gains have been weakening in recent months.

In fact, Labor Department officials said the reported job gain of 166,000 actually was inflated by various factors. Those factors included the introduction of a new technique for making seasonal adjustments, a longer-than-usual period between job surveys and delays caused by the brief government shutdown in November.

A more accurate estimate, they said, would be for a November employment increase in the range of 90,000 to 100,000--a sharp fall from the average gains of 294,000 a month last year.


The November performance was "consistent with an economy growing at a moderate rate," said Howard Roth, a senior economist with the Bank of America in Los Angeles.

At the same time, Reich expressed concern about skimpy wage increases. After rising for three months, average hourly earnings declined in November, dipping to $11.58, down 1 cent, and are up about 3% over the past year.

"The economic pie has grown, but the slice going to ordinary workers is shrinking," Reich said.

Reich and others also raised concern about the loss of 32,000 jobs in manufacturing during November. Since March, manufacturing has lost 220,000 jobs, including 86,000 in the apparel industry, a major business in Southern California.

Separately, the Commerce Department said sales of new homes fell 2.7% in October, and a University of Michigan report showed consumer sentiment rising during early December.

Silverstein reported from Los Angeles and Rosenblatt reported from Washington.

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