Payrolls in State Show Sudden Decline

Times Staff Writer

California lost a net 23,700 payroll jobs in September, the state Employment Development Department said Friday, a surprising decline that suggested that the state’s economy might have hit a soft patch last month.

It was the state’s first net job loss since December and the largest drop in more than two years, ending a string of relatively stable employment gains this year. California averaged more than 23,000 net new jobs a month through August after posting sluggish growth for much of the first three years after the 2001 recession.

The state’s September job swoon was surpassed only by Louisiana and Mississippi, both ravaged by Hurricane Katrina, the U.S. Labor Department reported Friday.

However, California’s jobless rate fell to 5.1% last month, down from 5.2% in August and equal to the national rate. It was the first time since April 1990 that the state’s unemployment rate was not higher than the nation’s.


Los Angeles County’s jobless rate continued to plunge, hitting 4.4%, down from 4.7% in August and 6.4% a year earlier.

The unemployment rates are based on a different survey than what is used for the payroll data -- helping to explain why joblessness can go down even as the number of jobs falls.

High energy prices, a continuing exodus of Hollywood film production jobs, and labor shortages in construction were blamed as factors contributing to the payroll job drop.

Much of the decline, however, was due to factors that weren’t incorporated into the normal seasonal adjustments, said Howard Roth, chief economist at the state Department of Finance. Many school districts started their school years in August instead of September, shifting employment growth accordingly, he said.

That explains why August’s employment gain was revised upward by a hefty 22,600 jobs, to 39,800, he said. Jobs in the government sector -- which includes public schools -- plunged by 17,000 in September.

But even after factoring in that shift, the state’s job picture was still sub-par, Roth said. While six of 11 job categories tracked by the state posted job increases, the largest was a relatively modest 3,300-job gain in the construction sector.

“It’s a fairly weak report,” Roth said.

He suggested that higher gasoline prices might have taken a toll on hiring in tourism and other sectors.


But it will take several months of poor job reports before anyone can conclude that the state’s economy is slowing significantly, Roth said.

“The job numbers are a bit of surprise now, although I suspect some slowing in the economy soon,” said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.

Higher interest rates, expensive energy and peaking home prices will slow economic growth later this year, he said.

Another factor that may have contributed to the weak report: continued runaway film production. Jobs in the information sector, which includes Hollywood, plunged 9,800 last month.


Construction companies also cited difficulties in finding skilled workers, which may have contributed to the unusually low job gain in that sector last month. Thanks largely to the state’s housing boom, construction has been by far the strongest sector for job growth in California in the last year. But worker shortages are expected to intensify as Gulf Coast rebuilding efforts gain momentum in coming months.

“Many of our subcontractors are maxed out,” said Bob Wissmann, vice president of Los Alamitos-based Millie & Severson General Contractors, which builds commercial properties. “They’re having to turn work down.”

Berg Electric Contractors has expanded its California job force by as much as 15% in the last few months, to about 1,000 employees, said Bill Wingerning, senior vice president of operations for the Los Angeles-based company.

While he’s looking for more skilled electricians, engineers, estimators and office staff, “there is a little difficulty finding people,” he said. “Most of the people who are good employees are already working somewhere.”


Some employment specialists said the state’s job market was stronger than the latest numbers suggested.

“We don’t see any reason to panic,” said Jesse Harriot, vice president of research for Monster Worldwide, an online job search firm. He noted strong demand in the Los Angeles area for jobs in such sectors as aerospace and manufacturing.

The 5.1% jobless rate painted a more positive picture because it is based on a survey of households, whereas the job number is based on a survey of payrolls.

Because the household survey includes the self-employed and workers in California’s huge “underground” economy, it often produces very different results from those in the payroll report.


The off-the-books economy and self-employment are growing particularly well in Los Angeles County, explaining the plunge in its jobless rate, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. Huge trade volumes at the local ports, for example, are leading to increased hiring of independent truckers who aren’t counted in the payroll survey, he said.

Based on the household survey, California gained a net 41,000 jobs in September. Many economists dismiss the household survey, saying its sample size is too small and unreliable.

The Golden State’s payroll job loss was its biggest since a drop of 28,900 in March 2003. California was one of 22 states that lost payroll jobs in September, the Labor Department said.

Louisiana lost a net 251,000 jobs last month, as its unemployment rate surged to 11.5% from 5.8% in August.



Times staff writer Roger Vincent contributed to this report.