Job Losses Show State Economy Is Slackening

By DON LEE

Aug. 15, 1998 12 AM PT

TIMES STAFF WRITER

In the latest evidence of California’s slowing economy and Asia’s deepening effect on manufacturers and services here, state officials said Friday that nonfarm job growth came to an abrupt halt in July, ending more than two years of continuous monthly gains.

The net job loss in July was small--only 500--and state officials downplayed its significance, citing unusual weather and technical factors that inflated by thousands the loss in food processing and local education employment.

Officials also highlighted a more positive, if seemingly contradictory, part of the report. Based on a separate government household survey that includes self-employed people, California’s jobless rate fell to 5.6% in July from a revised 5.8% the previous month.

Still, economists viewed Friday’s report as a confirmation that California’s economy is decelerating. Even though the state’s construction industry and the finance and real estate sectors hired briskly in July as home building picked up, they were not enough to offset weakness in manufacturing and other areas.

“This is not an aberration, and it could happen again,” Chapman University economist Esmael Adibi said of the unexpected payroll drop-off in July.

In Orange County, the jobless rate, which is not adjusted for seasonal factors, edged up to 3.1% from 3% in June. Manufacturing in the county is getting a strong boost from the brisk housing market, as furniture makers and lumber factories are showing impressive job gains.

California started out this year with nonfarm job growth running at a sizzling annual rate of 4.4%, but that has slowed to 2.9% in July. Adibi, among other analysts, is projecting the annualized job growth rate to fall to a modest 2% or possibly lower by the end of the year. The state’s performance in the last couple of months also has prompted some economists to downgrade their growth projections for next year.

The last time California entered negative territory in net nonfarm employment was April 1996, when it lost 8,200 jobs from the prior month. Since then, the pace of job formation has picked up steadily, sometimes furiously, reaching a peak of more than 50,000 in some months in the second half of last year. In the first six months of this year, the state has added an average of slightly more than 30,700 nonfarm jobs a month--with a low of 2,900 new jobs in January and a high of 45,700 in March.

The latest nonfarm employment data, which are widely seen as a

more accurate gauge of the economy than the household survey, also showed a continuation of specific worrisome trends.

There were sizable declines last month in key manufacturing sectors such as electronics and computer equipment, and growth in the important services industry, while still healthy, also is weakening. Both have been engines of the state’s recovery and expansion, but now both are feeling the widening toll of Asia’s financial crisis. The problems are more pronounced in Northern California, but they are cascading through the state.

“We expected the Asian market to account for the growth in our automation business this year,” said Terry Francisco, spokesman for Costa Mesa-based Rockwell International Corp., which announced in June that it will cut 3,800 jobs from its overall work force and will spin off its struggling semiconductor division by the end of the year. “Obviously it hasn’t. That’s caused us to scale back our plans.”

The Asian crisis is hurting agricultural regions as well, primarily in the Central Valley, where reduced demand for farm products from Asia has been exacerbated by the El Nino rains this year. The state’s overall farm employment is down nearly 7% in July from a year earlier, to 397,000 statewide, Friday’s report said.

California is the nation’s leading agricultural producer, and the food and farm industries account directly and indirectly for nearly one in 10 jobs in the state, according to Gov. Pete Wilson’s office, which released a report Friday that said agricultural production and income soared to a record $26.8 billion in 1997.

However, that is not likely to be sustained this year. In July, the residual effect of poor or late harvests because of the rains and lower demand from California’s top markets such as Japan and South Korea were the main culprits in the loss of more than 12,000 nondurable manufacturing jobs, mainly food processing. It is unclear how many of these jobs will be restored in the coming months.

Although the bulk of the food processing job cuts are happening elsewhere in the state, Southern California manufacturers are feeling the pinch too. In particular, some companies said, increased competition and a flood of lower-priced goods from Asian food processors have put a squeeze on them.

“There’s a lot of competition these days, from China, Thailand and other Asian countries,” said Jean Lee, president of Golden Tiger, a Huntington Park frozen dim sum manufacturer with more than 200 employees. Lee said Golden Tiger has so far been able to dodge the industry’s downsizing trend by tapping into club stores, adopting more competitive pricing and expanding its product line. But she was wary about the industry’s future.

In general, Southern California is holding up much better than its northern counterpart in the face of mounting pressures from Asia and a more pronounced national slowdown. With the San Jose area’s high-tech sector hurting and San Francisco showing lackluster growth, the six-county area from San Diego to Ventura is garnering more of the state’s share of new jobs--61% as of July, compared with less than 50% earlier this year, according to economist John Husing.

In July, the year-over-year total farm and nonfarm industry job growth ranged from 2.6% in Los Angeles County to a high of 4.3% in the Inland Empire (Riverside and San Bernardino counties) and Ventura County.

Los Angeles County’s seasonally adjusted jobless rate continued its descent in July, to 6.1% from a revised 6.4% in June. Manufacturing employment declined just slightly over the month, possibly due to some seasonal factors, but total factory employment was up 2.2% over July 1997--compared with a growth rate of 0.7% statewide. Textile and apparel jobs continued to lead the way in Los Angeles County, with furniture manufacturing also expanding robustly.

Construction employment, however, has yet to pick up steam in the county. It was up 3.6% in July over a year earlier, compared with a growth rate of 9.6% for the state and a whopping 11.2% for the Inland Empire.

Motion pictures, another critical piece of the region’s economy, showed no sign of any immediate resurgence. Movie employment was up 1,000 jobs in July, to 138,900, but that remained 1.5% below the figure for July 1997.

Jack Kyser of the Economic Development Corp. of Los Angeles also noted that the services sector is slowing somewhat, as Asia takes a bite out of tourism. He added: “Some of the froth has gone out of business services”--a category that includes temporary-help firms and software and Internet companies.

The seasonally unadjusted jobless rates for other areas included: 6.7% in July for combined Riverside-San Bernardino counties, up from 6.1% in June; 5.6% for Ventura County, up from 4.9%; and 3.8% for the San Diego area, up from 3.6% in June.

Times staff writers Vanessa Hua and P.J. Huffstutter contributed to this story.

* THE ECONOMY

Industrial output falls in July as producer prices edge up. D1

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Trend in O.C.

The County’s unemployment rate increased slightly from the previous month to 3.1%, but remained below last July’s rate of 3.7%.

July 1998: 3.1%

Source: California Employment Development Department; Researched by JANICE L. JONES/Los Angeles Times

Tracking the Slowdown

California saw its first job loss in two years in July, when total nonfarm employment fell by 500 jobs.

Job changes in thousands:

Last Year