State Jobless Rate Falls to 5.2%, Lowest Since 1990

California’s unemployment rate nosedived to 5.2% in May, the lowest since early 1990, amid a burst of hiring that reaffirmed the state’s robust economic growth, according to a government report released Friday.

The drop in the statewide jobless rate, from a revised 5.7% in April, was the biggest month-to-month decline in nearly two decades and was largely due to the addition of a whopping 56,500 new jobs, a big chunk coming from the construction of new homes.

“It’s a very significant drop in unemployment,” said Tom Lieser, a UCLA forecaster. “It puts us exactly a percent higher than the nation.”

Orange County’s jobless rate dipped to 2.5% in May from 2.6%, using data that are not corrected for seasonal variations. That matched the unemployment rate last December, which was a nine-year low.

The state’s survey of Orange County employers showed continued broad-based hiring, but notably slower than last year’s frenetic pace.

Still, unlike areas such as San Jose, Orange County’s manufacturing sector overall has held up amazingly well. Factory payrolls in the county were up 2% in May from a year ago, in contrast to a 1% decline for the state overall. And lately, the county manufacturers have been benefiting more from the strong construction industry and robust consumer spending that is driving the national economic growth.

“We’re more diversified and not as dependent on the export market,” said Esmael Adibi, an economist at Chapman University. “We’re being really helped by the domestic economy.”

Statewide, the big drop in the seasonally adjusted unemployment rate in May narrowed the gap between California’s jobless figure and that of the nation. The difference had been close to 3 percentage points in the mid-1990s, when many Californians left for other states where they saw more job opportunities. Now that the gap has narrowed, analysts say it could have a more pronounced reverse effect.

“It may lead to an additional pickup in the population growth and continued slowing of outmigration,” said Joe Mattey, an economist at the Federal Reserve Bank of San Francisco.

Friday’s report, by the Employment Development Department (EDD), said that unemployment among African Americans in California fell last month to below 9% for the first time this decade. Joblessness among Latinos edged down further as well, to 8.3%, also near a decade low.

Just a year ago, the jobless rate for blacks in California was about 11%. But as California’s economic growth has continued, it has increasingly lifted the fortunes of workers who have traditionally had high unemployment.

Michael Bernick, EDD’s director, said it was unclear whether the state’s significantly lower jobless rate in May will be sustained. He said the last time the jobless rate declined by that much in a single month was back in 1983.

“What it does indicate is the continued strength of the California economy,” he said.

By regions, the jobless rates varied widely in May, with near nil unemployment in peripheries of cities--especially in the Bay Area--to still-double digit joblessness in Kern, Fresno and other counties in farm and other rural areas of the state.

The unemployment rate in Los Angeles County, home to about 28% of all workers in the state, also tumbled last month, to 5.5% from 6.3% in April. Job growth in construction and services, including the recently sluggish motion picture industry, more than offset sharper cutbacks by aircraft makers and related firms.

Overall, L.A. County’s employment growth in May was running at an annual rate of 2.1%--lower than the statewide rate of 3.1% but still a healthy pace of expansion.

“It’s very steady, solid growth,” said Nancy Sidhu, Bank of America’s principal economist in Los Angeles. Sidhu said she was particularly encouraged by the surge in Los Angeles County’s once-lagging construction industry, where employment was up nearly 7% last month from a year ago.

“Anybody who drives around can see that,” she said, referring to the construction cranes that are popping up throughout the region.

Statewide, construction is now contributing even more vitally to economic growth, as commercial and industrial development remains strong and homebuilding is catching fire.

Ted Gibson, chief economist at California’s Department of Finance, said new homebuilding permits and valuation are increasing by double-digits from a year ago. Seasonally adjusted, the state added about 13,000 construction jobs last month. That was a striking contrast to construction job losses of 40,000 nationwide in May.

Construction-related manufacturers such as stone and glass makers and furniture producers, as well as building supply retailers and real estate firms, are all seeing strong job increases. Gains in construction explain why Riverside counties remain the state’s leading job growth metro area.

For all industries, California added 56,500 jobs statewide last month on a seasonally adjusted basis. Officially, that was five times the number of new jobs produced for the entire nation.

Gibson said sampling and other statistical quirks help explain that contrasting picture, as unusually warm weather in many parts of the nation earlier this this year stole away from employment gains that would normally have been posted in May.

Similarly, by the state’s count, California’s job growth in the first quarter this year had been unusually sluggish, leaving economists wondering and somewhat concerned, because retail sales, payroll withholding taxes and other economic indicators all pointed to strong growth.

As such, California’s May jobs report provided a sort of catch-up in terms of job growth. “It answers some of the puzzle we’ve had,” said UCLA’s Lieser.

Including May’s data, California’s nonfarm employers have added an average of 31,000 new jobs a month this year. That compares with monthly job gains averaging 38,000 in the first five months of last year.

That does not necessarily mean California’s job growth is slowing this year, analysts said, because the monthly surveys have been understating job growth at small firms, particularly high-tech start-ups.

Indeed, growth at software and Internet companies is probably contributing heavily to the big job gains in business services, which also include personnel supply firms. Engineering services, which includes biotechnology, also has added workers briskly this year. And payrolls in amusement and recreation were up 7% in May from a year ago, reflecting the opening of new parks such as Legoland in San Diego County.

The one lingering weakness in the Friday’s report was high-tech manufacturing, which shed another 1,500 jobs last month between aerospace and electronics makers. Apparel manufacturing and food processing, however, added to their payrolls last month, and manufacturing overall grew by 2,000 in May statewide.

While pleased with Friday’s report, analysts remained wary about the likelihood of an interest-rate hike by the Federal Reserve later this month, as that could dampen the stock market, which has helped propel spending and housing purchases in the state.

Moreover, other new reports hint a slowing in California’s economic growth may be in the offing. Bill Dunkelberg, chief economist for the National Federation of Independent Business, said his second-quarter survey of nearly 500 small businesses in California showed considerable weakening of optimism regarding near-term sales and hiring.

Also, even though more Californians are finding jobs more quickly, the pace of layoffs announced by California-based companies has also picked up this year. Layoffs averaged 10,400 a month through May, compared with 7,900 in the same period last year, according to consultant Challenger, Gray & Christmas.

“There’s caution in the wind,” Dunkelberg said Friday.

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Unemployment Trend

Orange County’s unemployment rate fell to 2.5% in May:

1999

May: 2.5

Source: Employment Development Dept.