Job Growth in State Predicted
Hiring in California is poised to accelerate, although perhaps not as strongly as after previous recessions, according to a measure that predicts California’s economic growth.
Chapman University in Orange said Monday that its California series of leading indicators increased to 1.97 in the first quarter of 2004 from a revised 1.3 in the last three months of 2003. It’s the third straight increase and a sign that the state’s employers should start beefing up payrolls soon, according to Esmael Adibi, director of the Anderson Center for Economic Research at Chapman.
Chapman data going back to 1980 show that an indicator value of 1.5 to 2.0 typically results in nonfarm payroll growth averaging 2% annually in the quarters following those readings. However, Adibi said, structural changes in the U.S. economy over the last two decades will make that level of growth tough to achieve this time around.
For starters, he said, huge investments in computers and other technology in the 1990s have sparked a surge of U.S. productivity that is allowing companies to squeeze more work out of fewer employees. Meanwhile, increased outsourcing of American jobs overseas appears to be taking a toll on domestic job creation.
In addition, California’s high business costs, particularly for workers’ compensation, are motivating many businesses to keep their payrolls lean. Adibi projects that California payrolls will expand a modest 1.1% this year after three straight years of declines.
“Definitely there will be some job growth,” Adibi said. “It’s just a question of the strength. I doubt the historical relationship between our indicator series and payroll employment will hold.”
Chapman’s indicator series tracks four variables -- real gross domestic product, real exports, the Standard & Poor’s 500 stock index and construction spending -- that have been found to have a strong correlation with hiring. Chapman’s data are consistent with forecasts by other regional economists predicting nonfarm payroll growth this year.
