State’s Job Losses Slow Markedly in December
California’s unemployment rate dipped to 6% last month and job losses slowed significantly, signs that the state’s hiring picture, while still weak, may be stabilizing after several months of heavy losses.
The decline in the jobless rate, from a revised 6.1% in November, was due in part to the thousands of state residents who have stopped looking for work and thus are no longer are counted in the unemployment figures. California lost 600 jobs in December, capping the worst year for the state’s job market since 1992.
Still, economists said December’s modest decline was an encouraging sign after several months of heavy losses. In November alone, the state lost 51,200 nonfarm payroll jobs. And it has shed nearly 88,000 since September.
“The job losses appear to be stabilizing,” said Brad Williams, senior economist with the California legislative analyst’s office. “But we’ve got some negative [factors] that have persisted and are still with us.”
While the deepest losses may have tapered, Williams and others said they are hard-pressed to identify any sectors of the state’s economy likely to post significant employment gains over the next few months. Key sectors such as high technology and manufacturing continue to lag, while government and some services are expanding only slightly.
“The state is still in recession,” said Steven G. Cochrane, who tracks the California economy as chief regional economist for West Chester, Pa.-based Economy.com “There’s no real job growth. The technology economy still seems to be constricting. The service sector is not expanding, and there’ll be less and less help from government spending as the state tries to reel in its budget deficit.”
December’s losses come amid other signs of a weakened economy. For example, the state reported that revenue from Californians’ withholding taxes in December fell 4.3% from the same month a year earlier to $2.32 billion. Over the second half of the year, withholding tax revenue was down 5.8% to $12.92 billion.
As reported a week ago, the national economy lost 124,000 jobs in December. While that boosted the nation’s unemployment rate to an almost seven-year high of 5.8%, the losses represented a slowdown from the fierce pace of layoffs in the months immediately after the terrorist attacks.
California’s latest numbers mirror that trend, with Southern California continuing to be the bright spot on the state’s employment scene. Los Angeles County’s jobless rate edged down to 6.1% in December from a revised 6.2% in November. Orange County’s unemployment dropped to 3.2% on a non-seasonally adjusted basis, from a revised 3.6% the month before. San Diego County showed a similar drop to 3.3% in December from 3.6% in November.
Unemployment likewise dipped in some hard-hit Bay Area counties, suggesting that the worst of the wrenching technology downturn may be over. But economists said the latest jobs report shows that the Southland, with its vast, diverse economy, continues to weather the storm better than its northern neighbor.
“The southern part of the state is still quite strong,” said Mark Schniepp, director of the California Economic Forecast Project in Santa Barbara. “It’s one of the best places in the nation to be right now in terms of strength of the economy.”
However, experts say Los Angeles County is proving to be the region’s weakest link. While the county’s jobless rate inched down last month, it is up sharply from the early part of the year, when it fell to a low of 4.7% in February. Lisa Grobar, an economics professor and director of the Cal State Long Beach Economic Forecast Project, said the county’s suffering manufacturing and export sectors will continue to be a drag on employment.
“Those are areas of real weakness,” Grobar said. “L.A. County is going to struggle in 2002.”
Indeed, the manufacturing sector, which tumbled into recession six months before the rest of the economy, is still clawing its way out. California’s factory employment fell by another 3,600 jobs in December, bringing total losses for 2001 to 92,700, a 4.7% decline.
December likewise saw job losses in transportation and public utilities, which declined by 4,000 jobs, while wholesale trade shed 2,800 jobs. Certain segments of the service industry also posted losses. Those included hotels, which dropped another 2,500 jobs, and business services, a catch-all category that covers everything from computer professionals to temporary agency help.
Sectors posting job gains included government, whose payrolls increased by 4,200 workers. The construction trades added 2,600 jobs and retailers added 1,800 positions.
But economists don’t see these sectors as huge drivers of job growth. Declining tax revenue has put state, local and federal governments in a budget bind. Retailers typically hire temporary workers during the holiday rush.
And analysts speculated December’s boost in construction jobs was largely due to dry weather and resumption of some work that was slowed after Sept. 11. Construction employment for all of 2001 ended down 1.7%, or 13,200, from a year ago.
Meanwhile, building permits, normally a solid indicator of what lies ahead in the construction business, are continuing to decline, particularly for commercial and industrial projects.
Construction “is in a downward mode,” said Ben Bartolotto, research director for the Burbank-based Construction Industry Research Board, which tracks the industry in California.
California ended 2001 with an overall decline of 38,100 jobs, the biggest year-over-year loss in nonfarm payroll employment since the recession of 1992. It’s a stunning turnaround from 2000, when the California economy added more than 554,000 jobs.
The 2001 job performance could look even worse next month, when the state performs its annual major revision of employment statistics, based on tax and unemployment insurance records from employers.
Preliminary information suggests that the state’s job total could be about 90,000 lower than currently reported, a shortfall that apparently reflects sharp job losses early in 2001 that didn’t show up in the initial employment reports. Those losses appear to have been focused in business services, which could include dot-coms and other firms hurt by the technology bust.
Still, most economists predict that California’s downturn, like that of the nation, will be shallow and short, even though the jobs picture may not improve until the second half of the year.
“We’re going to fumble around for a few months” on the jobs front, Schniepp said. “But the recession is going to be mild.”
Among California’s 58 counties, the lowest unemployment rates were 2.7% in Marin, 2.9% in San Luis Obispo and 3.2% in Orange. The counties with the highest jobless rates were Colusa at 25.5% and Imperial at 18.7%.
Among Latinos, joblessness rose to 7.1% from 7% the month before, while it climbed to 5.1% from 4.9% among whites. Joblessness for blacks remained unchanged at 8.5%.
