State Jobless Rate Slips to 4.9% in July

California’s unemployment rate dipped last month to 4.9% from 5.1% in June, but the improvement came because 31,000 workers dropped out of the labor force, not because of job growth.

Government reports released Friday showed California’s payrolls shrank by 7,100 jobs in July, almost wiping out the gains posted in June and prompting renewed speculation that the state may be sliding toward a recession.

“This paints a picture of an economy that’s flirting with recession,” said Ross C. DeVol, an economist and director of regional studies at the Milken Institute.

“I’m still not saying officially we are in a recession,” he said. “But these numbers put us close to being in one.”

In June, analysts at UCLA predicted that by the fall the state probably would experience a short, mild recession--a period of shrinking output and fewer jobs. The forecasters blamed the plunge on technology spending, the state’s electricity crunch and the national economic weakness in the projection.

The drop-off in technology spending was reflected in July’s unemployment report, which showed a loss of 12,000 jobs in California’s manufacturing sector. Hardest hit were computer, electronic component and communication equipment makers, exacerbating the rapidly deteriorating job front in the Bay Area. Santa Clara County, the heart of the Silicon Valley, saw the unemployment rate rise to 4.7%, low by historical standards but a huge leap from the 2.2% the San Jose area posted a year ago.

Orange County’s jobless rate also edged higher last month, to 3.1% from 3% in June. The county’s unemployment has climbed gradually since hitting a record low of 2% in December. However, unlike the statewide figure, the county’s jobless rate isn’t adjusted for seasonal variations, and in July 2000 the unemployment in Orange County also was pegged at 3%.

What is clearly different, though, is the pace of employment growth in the county. As in other parts of the state, Orange County isn’t producing new jobs at the brisk pace it did a year ago.

Manufacturing payrolls in the county have nearly flattened. But based on a year-over-year comparison, construction work is still growing robustly, reflecting the active housing market, as is the big services sector--from amusement businesses to software firms.

Statewide, the employment picture would have looked worse in July without the gain of 15,400 jobs in government. The construction industry lost 4,200 jobs, and the transportation and public utilities sectors lost 3,700.

Tourism held steady, but movie production showed a decline over last July of 2.9%, or about 5,000 jobs statewide, almost all of them in Los Angeles County, where the unemployment rate climbed to 5.6% from 5.5%.

“A lot of people are talking about the de facto strike in the industry,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., a nonprofit organization.

“Employment has been trending down over the last few months,” he said. “But it’s also a normal easing off. Hollywood really doesn’t work in the summer. They aren’t producing television series yet. They are getting ready to gear up for that. And in feature films, a lot of product was stockpiled” for the threatened strikes by Hollywood writers and actors before new contracts were signed.

Orange, San Diego, Riverside and Sacramento counties showed signs of strength, and new claims for unemployment were 52,556, down from the 64,765 new claims filed in June.

Michael S. Bernick, director of the California Employment Development Department, said he viewed the mixed employment reports as a sign that the state’s economy was steady as a whole.

“Within the state, there are big differences,” Bernick said. “While technology has driven unemployment up in the Bay Area, Southern California has largely remained low.”

Ted Gibson, chief economist for the state Department of Finance, downplayed the significance of the job losses, saying they may be exaggerated by a couple of extraordinary events: a painters’ strike in San Francisco that slowed construction work and the unusually cool July, which postponed some fruit and tomato processing jobs.

“It’s really a mixed picture,” Gibson said. “We’ve got a drop in the unemployment rate, which seems to be confirmed by the unemployment claims numbers. But, at the same time, we’ve got a drop in the nonfarm jobs. . . . What we’re seeing on a statewide basis is a fairly flat economy, if you take the two months [June and July] together.”

Also in July, 576,000 otherwise fully employed people worked part time. That is an increase of 47,000 people from last July and may reflect manufacturers’ efforts to bring payroll costs in line with reduced orders and to avoid higher energy prices through temporary plant shutdowns, shortened shifts and reduced workweeks.

Manufacturers “may feel, as I do, that this is not going to be a prolonged downturn,” said Tom Lieser, senior economist with the UCLA Anderson Forecast. “And so one way of reducing your labor input is to ask people to work fewer hours. So you stop short of laying them off, but you do reflect a lower labor input to your operations.”

With the 4,900 jobs lost in May, July’s payroll reduction makes this summer the first time in several years that the state has retrenched for two out of three months.

Still, July’s unemployment rate dropped because the number of people in the official labor force shrank, which economists attributed in part to the defection of workers only loosely connected to the job market.

Labor was at such a premium during the recent boom that the economy pulled in people who weren’t really looking to work. Ease of employment and generous wages enticed students to put off graduate school, retirees to put away their golf clubs and full-time mothers to find baby-sitters.

These workers are often the first to lose jobs in a downturn--and if they have stopped collecting or never applied for unemployment insurance, they fall out of the official labor force and are not taken into account when unemployment rates are calculated.

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O.C. Jobless Rate

The county’s unemployment rate, which is not seasonally adjusted, hit 3.1% in July. The monthly figures:

Source: Employment Development Department