Unemployment in California Climbs to 2-Year High of 5.2%
California’s unemployment rate climbed to 5.2% last month, up from 5% in July and the highest level in more than two years, state officials said Friday.
The rise in joblessness came amid growing evidence of deterioration in California’s economy. According to the latest employment figures, the state has lost 14,000 jobs over the last two months.
Many experts are increasingly concerned that the state economy is headed for at least a mild recession. UCLA business analysts this week said they believe that California and the nation already have fallen into the early stages of recessions that will extend through the end of the year.
Those concerns are heightened by the likelihood that Tuesday’s terrorist attacks will hurt the national and state economies by dampening or disrupting key industries such as retailing, tourism and airlines.
“The economy is pretty much stalled out at this point,” said Brad Williams, senior economist for the California legislative analyst’s office. “It faces enormous challenges in the next few months, with a combination of the continued problems in high-tech and the potential chilling effects associated with the terrorist attacks on the World Trade Center and Pentagon.”
Ted Gibson, chief economist for the California Department of Finance, said the state “is still doing better than the nation as a whole, but certainly the impact of the slowdown in the national economy has arrived in California, without any question.”
Even so, the employment report yielded some bits of moderately encouraging news--at least for parts of the state outside the Bay Area, which has been hammered by the downturn in the high-tech sector.
In Los Angeles County, the jobless rate slipped to 5.6% in August from 5.7% the previous month, though the rate was up from 5.3% a year ago. Orange County saw its jobless rate decline to 3.1% from 3.2% in July, but the rate was up from 2.7% in August 2000.
“We continue to have a dynamic in the state of continuing low unemployment in Southern California,” said Michael S. Bernick, director of the California Employment Development Department, the agency that releases the monthly employment report. Since a year ago, he said, “we have declining unemployment in most of the Central Valley and other rural counties of the state, with the increased unemployment mainly in the Bay Area.”
Some analysts also took a measure of solace in the fact that the U.S. job market appears to be deteriorating faster than California’s. The U.S. jobless rate in August climbed to a four-year high of 4.9% from 4.5% in July, as the national economy lost 113,000 jobs.
Yet the downturn in the Bay Area has been dramatic, particularly in Santa Clara County, the home of Silicon Valley. Its jobless level was 5.4% in August, up from 4.9% in July and from an extremely low 1.9% in August 2000, when computer-related industries still were booming.
For California to bounce back strongly, most business forecasters say business investment in computers and software will need to rebound. But analysts doubt that businesses, which spent heavily on new technology in recent years, will look to make new major investments amid the shaky economy.
Meanwhile, other evidence is building that California’s economy is weakening. The state’s personal income tax revenue in early September was off 3% from the same period last year, and it was off 5% in July and August. Exports are down because of economic problems among California’s international trading partners. And, in the Los Angeles area, movie production has declined in recent months, following heavy production late last year and early this year in anticipation of strikes that never happened.
Although UCLA economists and Bernick predicted the overall impact of the terrorist attacks would be minimal on California’s economy, other analysts expressed concern. They said the travel industry in particular could be hurt.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said even though a large number of tourists in Southern California arrive by car, the anticipated chill in air travel is bound to hurt hotels and related businesses. He noted that hotel occupancy rates already have dropped off in the San Jose and San Francisco areas.
Areas such as San Diego got an example of the travel downturn this week after the terrorist attacks. The Financial Planning Assn. called off its five-day annual convention, which had been scheduled to begin Wednesday and bring more than 3,600 financial planners to San Diego’s convention center.
Association spokeswoman Heather Almand said about 100 planners who arrived Tuesday wound up stranded in San Diego. “We’re not sure when they’re going to get home,” Almand said. “They’ve been booked on flights that have been canceled. They are all expected to fly out by Sunday--we hope.”
In the employment report, among the most worrisome signs was the downturn in the overall private-sector job market. State officials Friday issued revised figures for July showing that the state lost 26,200 jobs that month. That reflected a 33,700 decline in the private sector, and a 7,500 gain in government jobs.
The new report shows the private sector losing an additional 2,100 jobs in August. Although that was offset by a 14,300 gain in government jobs, producing a net rise of 12,200, many analysts said the increase is probably inflated and likely to be revised downward in next month’s report.
July’s unemployment rate of 5% also reflected a revision from the originally reported 4.9%.
California’s economic performance looks particularly feeble compared with last year. In 2000, the state gained an average of 46,200 jobs a month, compared with 5,998 a month over the first eight months of this year. In the last three months, the situation has been far worse, with the state averaging losses of 2,333 a month. In August, California even lost jobs in the services category, which includes computer-related and other business services and was once a bastion of the state’s economic strength.
Among blacks, unemployment held steady for the second consecutive month at 7.7% and is down from 8.2% in August 2000. Among Latinos, joblessness inched up to 6.8% in August from 6.7% the month before and 6.4% a year earlier. For whites, August’s unemployment rate was 4.9%, up from 4.7% the previous month and in August 2000.
California’s jobless level is the highest since June 1999, when it also was 5.2%.
For all of Southern California, including San Diego and Imperial counties, unemployment fell to 5.1% last month from 5.3% in July but was up from 5% in August 2000.
Analysts said part of the reason for the one-month decline in the reported Southern California unemployment rate is the hiring increase that takes place almost every year in August. The jobless figures for the state and Los Angeles County are adjusted to filter out those kinds of seasonal patterns, but there is no similar calculation for any other counties in California.
That flaw in the figures also probably softened the reported August rise in unemployment in the nine-county Bay Area. Its rate was 4.4% in August, up from 4.3% in July but considerably higher than the 2.6% rate in August 2000.
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Times staff writer Liz Pulliam Weston contributed to this report.
