California's unemployment rate hit a five-year high of 6.6% in December, capping a year in which the state lost a net 25,800 jobs, state officials reported Friday.
It was California's first back-to-back annual decline in nonfarm payroll employment since the deep recession of the early 1990s. Job losses have mounted in recent months -- a troublesome sign for an economy hobbled by the slump in the technology sector, particularly in Northern California, and a massive budget deficit.
"There just isn't much to build on," said Tom Lieser, senior economist with the UCLA Anderson Forecast. "A turnaround doesn't look imminent."
In December, California lost 15,400 jobs as retailers and manufacturers struggled and government payrolls showed the first signs of weakening. That came on the heels of a November in which the state shed 11,700 positions, more than previously estimated, according to the state Employment Development Department.
California's current slide, however, is nowhere near as severe as the downturn of the early 1990s, when the state lost more than half a million jobs and unemployment soared to 9.7%. And the state's recent performance appears to be no worse than that of the nation overall, which finished 2002 with big job losses and posted two consecutive years of employment contraction.
Still, California has given up jobs in three of the last four months -- a time when economists expected to see the stirrings of recovery. The job market still is reeling from the smoldering tech wreck, government hiring that is losing steam and the reluctance of private-sector employers to add workers amid uncertainty about the economy and a possible U.S. war in Iraq.
California's jobless rate in December rose from a revised 6.5% in November. By comparison, the U.S. unemployment rate held steady last month at 6%. Unemployment among nonwhites in California was at a six-year high of 9% last month, and the teenage jobless rate rose to 18.2%.
Friday's report also showed that the state's labor force shrank in December, suggesting that the official unemployment rate may be understated because discouraged workers have stopped seeking employment and thus no longer are being counted in the government's tally.
"People are giving up," said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. "That's the sign of a weak economy on the employment front."
Although business activity has slowed up and down the state, California's story is largely a tale of two economies: The northern region has been clobbered by the collapse in the technology sector, while the more diversified southern part has inched ahead and still posts some of the lowest unemployment rates in the state -- with Orange County at 3.7% in December and San Diego County at 4%.
Los Angeles County, a perpetual laggard compared with its neighbors, saw its unemployment rate hold steady last month at 6.2%.
The Bay Area began hemorrhaging jobs in early 2001, and the bleeding has yet to stop. Friday's report showed that the nine-county area lost an additional 2,300 jobs in December, bringing its losses last year to 59,600. Santa Clara County, once the job engine of Silicon Valley, posted 7.5% unemployment last month and has shed more than 115,000 jobs since employment peaked in December 2000.
"We've gone from riches to rags," said Robert Locke, financial director for Mountain View, Calif., which is facing a $10-million budget gap largely because of plummeting sales and hotel taxes stemming from the tech crash.
Northern California's job losses in 2002 swamped the modest -- and uneven -- gains made in Southern California. Riverside and San Bernardino counties led the pack with a combined gain of 22,000 jobs, mainly in services, retailing and construction. San Diego County followed with a net gain of 17,800 jobs. But Los Angeles County's nonfarm payrolls declined by 18,200 last year, and Orange County dropped 8,600, in large part because of slumping production of aircraft and high-tech goods.
"The guts of the problem are sitting in manufacturing," said Nancy Sidhu, senior economist with the Los Angeles County Economic Development Corp.
The state's manufacturing industry continued its long slide in December, lopping off an additional 2,100 jobs. California's factory payrolls have declined in 22 of the last 23 months, for a total of 187,100 jobs -- more than 10% of the sector's workforce -- since its peak in early 2001. The lion's share of those jobs were centered in high-tech manufacturing.
Sidhu said the good news is that the worst manufacturing job cuts appear to be over. The bad news is that the recession has compelled many technology companies to shift production overseas to reduce costs.
"Some of those jobs won't be back" when the economy rebounds, Sidhu said.
Even some reliable employment stalwarts are beginning to falter. Retail and wholesale trade payrolls fell by 10,400 in December, underscoring a lackluster Christmas season for merchants.
Government, which has posted the strongest employment gains of any major sector in the last couple of years, trimmed employment by 1,100 last month. California's budget woes are forcing communities statewide to freeze payrolls, cut staff and contemplate future layoffs.
"We can write off the government sector for the foreseeable future," said Adibi of Chapman University.
It's up to the private sector to create more jobs, he said, adding that that won't come easily because war jitters, skepticism about the strength of the recovery and concerns about tax hikes and other fallout from California's budget woes are paralyzing employers.
"All this uncertainty is killing us," Adibi said. Business owners "simply don't want to commit to hiring new people in this environment."