California’s Jobless Rate Dips to 6.2%

California’s unemployment rate fell to 6.2% in August as the state’s employers added 11,700 net jobs to their payrolls, according to statistics released Friday by the state. But the numbers belied continued weakness in the job market.

The state’s labor force shrank last month, a sign that some workers have become so discouraged that they stopped looking for employment and thus are no longer counted in the jobless statistics, economists said.

Though the August jobs increase was the largest monthy rise since January, most of the new positions are on government payrolls, a sign that private-sector employers remained reluctant to do much hiring.

Since the pre-recession employment peak in January 2001, California has lost 69,800 nonfarm payroll jobs. This year, the world’s sixth-largest economy has created a mere 3,400 net jobs.

“The fact that unemployment is going down is not an indication of a turnaround in the labor market,” said economist Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. “The labor market is basically at a standstill. We are treading water.”

California’s 6.2% jobless rate was down from a revised 6.4% in July, Employment Development Department figures showed. A year ago the rate stood at 5.5%.

The U.S. unemployment rate in August was 5.7%, down from 5.9% in July. In August 2001, the U.S. jobless rate was 4.9%.

The state added a total of 20,400 jobs in four sectors in August: wholesale trade, retail trade, financial services and government. The biggest contributor was local government, which added 16,400 jobs, most of them in education. But those jobs are notoriously difficult to adjust for seasonal ebb and flow of teachers from the classroom.

In July’s employment report, for example, the EDD said California gained 7,500 net jobs, fueled largely by increases in the education sector. But the department revised those figures sharply downward in Friday’s data, saying the economy lost 11,000 jobs in July.

Analysts such as Brad Williams, senior economist for the California legislative analyst’s office, warn against reading too much into August numbers showing an increase in government employment. The real story, he said, is the dearth of jobs being generated by the private sector, which is reflected in shrinking payroll tax revenue. The state’s withholding tax revenue was down 6% in August compared with a year earlier. That’s a big reason California is facing budget woes.

But Williams said the bigger concern is a potential slowdown in consumer spending, which has helped prop up the economy. Easy credit and cash-out mortgages have allowed Americans to keep spending during the downturn. But the spree can’t continue if people don’t have jobs.

“From a labor market perspective, the economy has basically stalled out,” Williams said. “...The big question is how long consumers can keep spending ... without employment growth.”

The lengthening duration of unemployment in California likewise points to softness in the labor market. In August, 17.3% of the state’s 1.1 million jobless residents had been without work for at least 27 weeks. That’s up sharply from the trough of 11.7% in September 2001.

“There is a corresponding relationship between the duration of unemployment and the overall job picture,” said Michael Bernick, director of the EDD. “It went down during the boom years. Now it’s creeping up” as the labor market has slowed.

Los Angeles County saw its August unemployment rate drop to 6.4% from 6.8% in July, Orange County dipped to 4% from 4.2%, Riverside County fell to 6.5% from 6.8%, San Bernardino County was down to 5.5% from 5.9% and San Diego County dropped to 4.1% from 4.4%. Ventura County was the only Southern California county to post an increase in joblessness, climbing to 5.7% in August from July’s 5.4%.

Among California counties, San Luis Obispo posted the lowest August unemployment rate at 3.2%, while Imperial recorded the highest at 21.8%.