State's Job Gains Highest in 15 Years

By DON LEE

Feb. 27, 1999 12 AM PT

TIMES STAFF WRITER

California’s economic growth was much stronger in the final months of last year than previously thought, creating nearly a half million jobs in 1998--the highest number in 15 years--and promising unexpected relief for the state budget.

The state’s annual jobs report Friday also indicated that employment growth did not slow down in the second half of last year as many believed. In fact, the Employment Development Department said momentum actually picked up late last year, and that it carried into January as employers kept on hiring briskly.

Orange County’s job growth for 1998 was boosted sharply to an exceptionally high level. For all of last year, the county added some 61,000 new nonfarm jobs--exceeding the previous estimate by more than 11,000.

For 1998, Orange County’s nonfarm payrolls surged by a sizzling rate of 5%--compared with 3.5% for the state overall.

Every major industry in the county added notably to its payrolls. Manufacturing, while down sharply nationwide, expanded by 6%, or 14,000 jobs, in Orange County last year. Construction added 5,000 jobs, retail and wholesale trade increased about 12,000, and the sprawling services sector boosted payrolls by some 20,000--almost half of that in computer and other business services.

Overall, Orange County’s jobless rate stood last month at a minuscule 2.9%. That was up from a revised 2.5% in December, but unlike the national and state numbers, the county unemployment rate is not seasonally adjusted for such things as cutbacks by retailers after the holidays.

Statewide, the seasonally adjusted jobless rate fell last month to 5.7%, the lowest in eight years, from a revised 5.9% in December. While still considerably higher than the 4.3% national jobless rate in January, California’s rate masked unusually low unemployment in the Bay Area and San Diego, where the labor markets are among the tightest in the nation.

“It’s a very positive sign . . . and will have positive impacts for the state’s revenue outlook,” said Brad Williams, senior economist at the state’s Legislative Analyst Office in Sacramento.

The new California data dovetailed with a federal report Friday indicating that the nation’s gross domestic product in the fourth quarter jumped to one of the highest levels in the last two decades.

The Commerce Department said GDP, or total output of goods and services, surged at an estimated annual rate of 6.1% in the last three months of 1998. That was revised from a previously reported 5.6%, thanks largely to stronger than assumed business investments and exports. Total U.S. economic output for 1998 was $8.68 trillion.

Economists already have raised their once-somber outlook for the nation’s economy, and California’s latest jobs report confirmed that the state was tracking the nation’s astonishing growth.

California’s new report, which is based on payroll data from nearly every employer, as opposed to a small sample used for monthly reports, showed that California added 454,400 nonfarm jobs for all of last year. That amounted to a very robust growth rate of 3.5%, about a full percentage higher than the nationwide performance.

The state ended 1998 with 13.8 million nonfarm jobs and total employment of 15.5 million, including the self-employed and farm labor.

In January, California employers added another solid batch of jobs--about 35,300. As in recent months, there were extraordinary gains in construction, computer and other business services and engineering management firms.

The jobless rate in Los Angeles County dropped in January to 6.4%, from 6.8% in December. But unemployment in the county was 6.3% in January 1998, and Friday’s report showed that job growth in Los Angeles County was not as strong last year as previously estimated.

One contributing factor to that was garment manufacturing. State officials said Friday that the industry hasn’t been growing in the last 18 months as was previously thought, confirming what many in the trade had believed because of strong import competition and an exodus of production to Mexico. In fact, officials said that the state’s apparel manufacturing employment figure--which now totals about 154,000--had been overestimated by about 13,000 jobs in the last 18 months.

By contrast, employment in motion pictures--another big industry but a difficult one to track--had been underestimated last year by about 9,000, according to the new data. That meant that for last year, employment in film production, almost entirely in Los Angeles County, had actually kept growing last year instead of shrinking.

Among regions, the job revisions showed that the San Francisco and Oakland areas had stronger job growth last year than assumed, largely because of the burst of hiring in software and computer services. By comparison, the San Jose area, home to the Silicon Valley, is now the slowest growing area among the state’s major metro areas.

In Southern California, the 1998 employment figures for Orange, San Diego and Ventura counties were all revised higher. Job growth rates in those areas, as well as the Inland Empire, exceeded the statewide figure. The performance reflected strong trade to Mexico and the high-flying real estate sector, as well as gains in telecommunications and biotechnology.

Previously, statewide reports had shown sharply lower payroll growth in the second half of last year--a trend that had somewhat puzzled economists and contributed to the state’s lower budget projections for fiscal 1999.

Tom Lieser, an economist at the UCLA-Anderson Forecast Project, said: “It’s going to mean a more balanced revenue picture statewide.”

Indeed, the state’s current fiscal year budget was based on what seemed to be a slowdown in late 1998 and expectations for sharply lower growth this year. The state Department of Finance had projected job creation of 2.1% for this year.

But Ted Gibson, the department’s chief economist, said Friday: “It’s pretty clear from these numbers that we will be changing our forecast.”

It is still not yet clear whether the increased revenues will eliminate the state’s projected budget deficit.

Earlier this month, the Legislative Analyst Office said it expected the state to take in about $750 million more this year than budgeted by the governor’s office. Williams, the economist at the office, said it was unclear whether the strong jobs outlook in Friday’s report might widen that difference.

Part of the state’s economic outlook still rests on what happens to California’s exports, particularly to still-struggling Asia, where about half of the state’s shipments are sent, accounting for a good 5% of California’s economic output.

“It seems like we may have digested the worst of the export hit from Asia,” said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto.

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Jobless Jump

Orange County’s January unemployment rate increased to 2.9% from December’s 1998 low of 2.5%. The 13-month trend, not seasonally adjusted:

1998

Jan.: 3.1%

Feb.: 2.9%

March: 2.7%

April: 2.7%

May: 2.7%

June: 3.0%

July: 3.2%

Aug.: 3.1%