California Job Growth Slows Sharply in June

Signaling that California’s economy is cooling, job growth in the state slowed markedly in June as the Asian crisis continued to weaken manufacturing, motion pictures and some other sectors.

Government officials said Friday that nonfarm employers in the state added 30,000 to their payrolls last month, many of them in business services and construction. That was enough to push the unemployment rate down to 5.7% from a revised 5.9% in May.

Although economists still viewed the 30,000 new jobs as a healthy amount, it was considerably lower than the 42,000 posted in May. More significant, while job figures can be volatile from month to month, a clear pattern emerges when the data are viewed over six months.

In January, the state’s total nonfarm job count was about 538,000 higher than a year earlier. But since then, the year-to-year growth figure has declined successively every month, to 398,000 in June.

Job growth in the second half of last year was unusually strong, and economists did not expect the state to maintain that sizzling pace this year. Bruce Smith, an economist at the state Department of Finance, accentuated the positive, saying jobs in construction and business services--which includes high-paying software programmers--are steaming along. Also, California continues to add jobs at a brisker pace than the nation.

But other economists expressed more concern about the rate of the growth drop-off and what that may portend for the coming months.

“What it says to me is that we are moving from an aggressive period of growth to a more moderate one, where policymakers can no longer be sanguine that the economy can accelerate as it has been,” said John Husing, a longtime regional economist based in Riverside. “Definitely, there is a shifting of gears out there, and you have to be alert.”

Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County, echoed those concerns: “The second half of the year is going to be much slower growth.”

The slowdown is statewide but more pronounced in Northern California, economists said, partly because Asia’s financial crisis is putting increasing pressure on sales and employment in Silicon Valley. Earlier this year, the San Jose area recorded year-to-year job gains of nearly 50,000, but that has tapered off, to 27,600 in June.

The momentum has swung to Southern California, which is picking up more and more of the share of new jobs. But the rate of hiring is slowing here as well.

In Los Angeles County, nonfarm employment in June was up 97,300 from June 1997, for a growth rate of 2.5%. But that is the lowest rate so far this year.

The good news is that the county’s jobless rate continued to drop, to 6.3% from a revised 6.4% in May. But that was largely because of a drop in the labor force.

In contrast to the nation, which is showing a decline in manufacturing jobs, Los Angeles County is relentlessly adding factory workers, especially in food processing and the remarkably resilient apparel industry.

However, growth in the county’s motion pictures industry has clearly abated. From January to June, the industry’s payrolls averaged 126,500--down from 127,200 in the first half of 1997.

“There’s this very subtle retrenchment,” Kyser said, noting that Walt Disney, Paramount Pictures and others are releasing fewer feature films. Television and commercial production through June is also down, industry figures show.

Kyser, in his upcoming midyear economic forecast, is projecting the county’s job growth rate will fall to a modest 1.9% from the 2.6% expected this year. Last year, the growth rate was 2.2%.

For the rest of Southern California in June, the year-to-year nonfarm job growth rate ranged from 2.6% in San Diego County to 4% in the Inland Empire, with Orange County in the middle. Partly because of school closings, the seasonally unadjusted jobless rate for Orange County went up to 3% in June from 2.7% in May, and the Inland Empire’s figure rose to 6.1% from 5.6%.

James Gikas, an economist at Recon Research Corp. in Los Angeles, said his firm’s broad index of indicators--which includes stock prices, business start-ups and average factory work hours--shows California’s growth has slowed in recent months. He said he was not prepared to sound an alarm yet, “but it certainly bears watching.”

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Jobless Rate

California unemployment rate, seasonally adjusted:

5.7%

Source: Employment Development Department