Job Losses Working Their Way Into More Sectors in California
The flu is spreading.
Job losses in California, once confined largely to technology, manufacturing and tourism, have begun seeping into other sectors, fueling concerns that the state’s economy may have a tougher time rebounding than anticipated.
Analysts say months of declining employment at factories and high-tech businesses is infecting other industries, such as retail and wholesale trade, construction and even the stalwart business services sector. At the same time, more and more government workers are getting hit with pink slips as the state grapples with its budget crisis.
Temporary-help firms are among the first to see a pickup during a recovery, and nationally, that appears to be happening. But in California, temp-firm employment is flat.
“We’re starting to see companies laying off more people to get back to profitability,” said Kim Megonigal, president of Irvine-based Kimco Staffing Services Inc. “I haven’t seen any companies hiring. Our business has been flat.”
The state’s jobs report Friday, showed that the sprawling business and professional services category -- which includes legal and accounting firms and architectural and engineering companies -- slashed a net 11,100 jobs in May. That was the biggest decline in almost two years, according to the Employment Development Department.
What’s more, the latest data suggest that while Northern California continues to feel the brunt of the employment losses, the malaise is spreading to the south. Of the 21,500 nonfarm jobs that were lost last month, economists estimate that about half were in Southern California. Even the Riverside-San Bernardino area, the Southland’s job growth engine, has seen a marked slowdown lately.
Anna Rachel Hutts, 27, said she was laid off in February from an architecture firm where she had worked as a design assistant for eight months. She’s still hunting for a new job. “I hit a brick wall everywhere I turned,” the Pasadena resident said.
John Husing, an independent economist in the Inland Empire, called the last state jobs report “awful.”
“Virtually every other area, compared to a year ago May, was down,” he said. “It’s the first time that’s happened since the early 1990s.”
Employment in the Inland Empire in May was up only 6,400 jobs from a year earlier, the slowest year-over-year growth rate for the region since early 1994. “We have to add jobs here at a rate of 40,000 to keep up with our population growth,” Husing said.
Mark Zandi of Economy.com, a consulting firm, said the May job figures for California reflected considerable gloom tied to the Iraq war, higher oil and natural gas prices and battered consumer confidence.
As such, he said, “I don’t think the recent numbers suggest that the California economy is slipping away and will get worse. I think these numbers reflect a very difficult period when the country was in the middle of a war we were very uncertain about. Now that that’s been resolved, I think the California economy will soon stabilize and regain its footing.”
But there are other signs that a recovery isn’t around the corner.
Companies in California announced 86,551 job cuts in the first five months of this year, or about 15% of the nationwide total, according to Challenger, Gray & Christmas Inc., a job tracking firm in Chicago. That was far more than any other state and well beyond California’s 11% share of the nation’s labor force.
“California seems to be taking job cuts more heavily than anywhere else so far this year,” said John Challenger, the firm’s chief executive. The state’s data show that job losses have been accelerating, and outpacing the nationwide rate of decline. The Southern California job market, which had been flat last year, is now in a “gentle downward slope,” said G.U. Krueger, an economist at Institutional Housing Partners.
Companies cutting back represent a broad spectrum of industries.
Santa Monica-based MCA Records will cease to exist in the coming weeks, a victim of the ongoing slide in sales in the recording industry. Several performers will be dropped as its operations are folded into Geffen Records of Universal Music Group’s Interscope Geffen A&M; Records.
Sprint Corp. plans to eliminate its Web-hosting business and as many as 200 jobs this year, once customers find other companies that can fulfill their needs. Some displaced workers may find other Sprint jobs.
Three of the eight Sprint E-Solutions Internet Centers around the nation that the company will phase out are in California. One is the 93,000-square-foot Los Angeles office that opened in the old post office Terminal Annex building at Alameda Street and Cesar Chavez Avenue in December 2001. The other California offices are in Sacramento and Silicon Valley.
Economists and businesspeople grumble that California is becoming an increasingly tough place to do business partly because of its budget woes, government regulations and workers’ compensation rates.
The increase in workers’ compensation insurance rates “literally has put a halt to hiring” by businesses, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.
The budget crunchwill have more far-reaching effects, experts say.
“The business community is still waiting on pins and needles to see what the budget resolution will mean to them,” Kyser said.
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Job shifts
Employment in major California industries last month:
*--* Industry May employment Change from April* Professional and business services 2,104,500 -11,100 Government 2,441,600 -9,000 Manufacturing 1,588,000 -4,000 Trade and transportation 2,729,200 -3,200 Information 470,200 -2,300 Construction 788,000 -1,400 Natural resources and mining 22,200 +600 Educational and health services 1,525,700 +800 Leisure and hospitality 1,402,900 +1,600 Financial activities 862,200 +1,600 Other services ** 504,500 +5,200 Total 14,439,000 -21,500 *--*
* Seasonally adjusted.
** Includes auto repair shops, laundry services and religious and civic organizations.
Source: California Employment Development Department
Times staff writers Hanah Cho and Ronald D. White contributed to this report.
