State’s Jobless Rate Up
Providing strong evidence that California’s economic growth has ground to a near-halt, the state’s unemployment rate climbed to 5.1% last month, up from 4.9% in May.
State officials also reported Friday that California gained a meager 3,600 jobs in June. That’s a dramatic turnabout from last year, when the state added an average of 46,200 jobs a month, and it signals an economy in which there is not enough work to keep up with the influx of new job hunters.
Although the downturn has been concentrated in the Silicon Valley and elsewhere in the Bay Area, the trend also struck Southern California. In Los Angeles County, the jobless rate climbed to 5.4% in June, up from 5.2% the month before.
Taken together with other recent business indicators, the latest employment statistics portray California as only narrowly avoiding a recession, an episode when economic output shrinks and jobs disappear.
“It suggests an economy that’s drifting, not going anywhere,” said Brad Williams, senior economist for the California legislative analyst’s office.
June’s job figures show a combination of steep declines in manufacturing, particularly in high-tech fields, along with moderate or small gains in such areas as government, retailing, construction and some services.
But Williams warned that manufacturing and the healthier parts of the economy “can’t remain on divergent paths forever.” He cited the way the big retrenchment in aerospace manufacturing in the early 1990s eventually infected the entire state economy.
Williams expressed confidence that U.S. business spending on high technology will recover late this year or early next year. He said that, in turn, would revive the state’s manufacturing industries and stop California’s slowdown from deepening into a recession.
Still, Williams said, if California’s high-tech slump is prolonged, “it’s going to be very difficult for the rest of the economy to continue to grow.”
While Williams’ reluctance to predict a California recession is in line with most forecasters, analysts at UCLA said last month that the state probably will slip into a short, relatively mild recession this summer or fall.
Tom Lieser, an economist with the UCLA forecasting group, said Friday’s employment report did nothing to change that outlook.
“It’s not clear we’re in a recession yet, but we’re holding our breath about this summer,” Lieser said, citing the possibility of rolling blackouts, higher electricity costs and the ripple effects of already announced layoffs.
Perhaps the best news, Lieser said, is that California has avoided the sharp job cuts suffered in the nation overall. Over the last three months, the U.S. economy has lost 271,000 jobs, the worst decline in more than a decade. The U.S. unemployment rate was 4.5% in June, up from 4.4% in May.
In predicting a California recession, the UCLA forecasters cited several factors, including plummeting technology spending and the state’s electricity crisis. Analysts also say that the state is being hurt by the sour national economy and weakness around much of the globe, including such major California trading partners as Mexico and South Korea.
Even if California slips into a recession, however, analysts say the impact on the state’s residents will be far milder than it was in the early 1990s, the last time the economy went into reverse.
One of the main reasons is that the early 1990s recession was brought on by the devastation of California’s aerospace industry, which today employs barely one-third as many workers as it did in the late 1980s. By contrast, the high-technology slump leading the current California slowdown is expected to be only a temporary phenomenon and, even in the short term, it should produce far fewer job cuts.
In addition, the industry that was the second major contributor to the early 1990s recession--construction--appears to be in far better shape than it was a decade ago. A boom in new office construction in the late 1980s burdened California with vast amounts of unused office space. That created financial problems that rippled through the commercial real estate industry. Today, there is no similar glut in sight.
Likewise, home construction was much more brisk in the late 1980s than it has been in recent years. As a result, it is unlikely to fall as far--if it falls at all.
Analysts say the depth of any recession also is likely to minimized, in California and across the country, by the Federal Reserve’s aggressive moves this year to lower interest rates. The recent federal tax cuts are expected to provide some modest help, too.
After sinking to a 32-year low of 4.5% in February, California’s unemployment rate has steadily inched up. It now stands at its highest level since June 2000, when it also was 5.1%. Meanwhile, the state has added employment this year at a sluggish pace of 9,700 jobs a month.
In the last two months, however, the job market has been particularly weak. State officials on Friday issued revised employment numbers for May showing that the state, instead of gaining 3,200 jobs as reported last month, actually lost 4,900 positions.
The economic weakness is being spread, albeit in varying measures, around the state. Los Angeles County’s jobless rate, at 5.4%, also is back to where it was in June and July of last year. Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said such factors as a Hollywood production backlog, a hiring slump in the once-hot business services sector and Southern California’s own manufacturing downturn have contributed to cooling of the local economy.
Orange County’s jobless rate climbed to 3%, up from 2.6% in May, and its highest level since July 2000, when it also was 3%.
Still, the most dramatic change lately has come in the Bay Area, particularly in technology-dependent areas. In Santa Clara County, home to the Silicon Valley, the jobless rate climbed to 4.2% in June, up from 3.3% in May and from a low of 1.3% in December.
“We’re seeing the direct impact of layoffs at the dot-coms and at the established technology companies, as well as the spinoff impact that affects firms that have catered to the technology affluence, like restaurants, catering firms and advertising firms,” said Michael S. Bernick, director of the California Employment Development Department, which compiles the monthly employment figures.
Figures from Bernick’s agency also show that unemployment in the nine-county San Francisco Bay Area climbed to 3.9% last month, up from 3.2% in May and up from 2.8% in June 2000.
In the six-county region consisting of the five Los Angeles-area counties and San Diego, joblessness rose to 4.6% last month, up from 4.1% in May, but down from 4.8% in June 2000. (These figures, unlike the statistics for California overall and Los Angeles County, are not adjusted for seasonal trends. As such, they do not filter out the normal rise in unemployment in June resulting from the influx of recent high school and college graduates into the labor force.)
Rural California, whose economic plight often is overlooked despite its double-digit unemployment rates, also suffered a gain in joblessness. In the eight-county San Joaquin Valley region, which extends from San Joaquin County on the north to Kern County on the south, the jobless rate climbed to 11.4% in June, up from 10.9% in May but down from the 12.8% in June 2000.
Among California’s 58 counties, the highest unemployment was in Imperial, east of San Diego, where the jobless rate was 21.4%.
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California’s Unemployment Rate
February’s jobless rate of 4.5% was the state’s lowest since 1969. All figures are adjusted for seasonal trends.
June: 5.1%Source: California Employment Development Department
