State lost 15,800 jobs in October

Times Staff Writer

A cooling in housing and Hollywood helped push California employers to cut 15,800 jobs last month, leaving economists split over whether the state’s economy was merely slowing or about to get a lot worse.

The state’s unemployment rate held steady at 5.6%, unchanged from September but up from 4.8% in October 2006, the California Employment Development Department reported Friday.

And for the second month in a row, more than 1 million Californians were looking for work -- a benchmark not seen in nearly three years. The number of unemployed slipped to 1.02 million in October, down 7,000 from September but up 166,000 from a year earlier.

October’s decline in employment, the biggest since the loss of 14,000 jobs in July, confirms that the state’s economy is slowing, said Stephen Levy, who directs the Center for the Continuing Study of the California Economy in Palo Alto.


But “this is a slowdown that the nation is participating in,” Levy said.

The state’s employers created 3,400 jobs in October but eliminated 19,200. The month’s net decline of 15,800 jobs follows a revised net gain of 12,100 in September and 21,900 in August. In all, 15.3 million people were on California’s nonfarm payrolls, according to the department’s October survey of employers.

A separate survey of state households, designed to pick up casual jobs and self-employment, found that 17.2 million residents held jobs in October, down 61,000 from September but up 110,000 from October 2006.

Nationwide, employers added 166,000 jobs in October, the Labor Department said this month -- twice as many as analysts had expected. U.S. unemployment was unchanged at 4.7%.

In California, the construction industry continued to be hit hard, shedding 4,200 jobs for the month and 31,000, or 3.3%, over the last year. Those cuts are largely a result of the continued downturn in housing and financial services -- fallout from the sub-prime mortgage meltdown.

Financial services payrolls fell by 1,500 positions in October after a loss of 2,700 in September.

The October figures also reflected the petering out of a Hollywood production frenzy in anticipation of the current strike by television and movie writers, Levy said.

The information industry, which includes the entertainment sector, posted the biggest monthly decline, losing 6,300 jobs in October. This followed an increase of 8,200 in September as producers raced to wrap up movies and television shows before the Writers Guild of America strike, which began Nov. 5.

Levy cautioned against making “a big deal” of the overall job loss figures.

“None of this is like when we lost our aerospace industry -- that was permanent -- or when the Internet bubble burst,” he said.

The current job losses do not signify any loss of strength in the state’s key economic sectors, he said. “It’s not like our economy is threatened from this.”

But Chapman University’s Esmael Adibi sees the numbers as further evidence that California is headed into a recession.

Losses in the construction and financial sectors, which fueled the state’s growth from 2003 to 2006, are having “a ripple down” effect in retail and other economic sectors that’s “really significant,” said Adibi, who directs Chapman’s Anderson Center for Economic Research.

When people bought new homes, they also got furniture and appliances and spent money in home improvement stores, he said. Some used the equity in their homes to buy new cars. “That’s not happening anymore,” Adibi said.

As a result, year-over-year job growth in the state slowed from 1.6% in January to 0.7% in October. Job growth probably will continue to slow, Adibi predicted, and may turn negative next year.

The housing correction is not over yet, he said, and is spreading to nonresidential real estate, including office buildings and retail space. And with gasoline prices continuing to rise, the outlook for the retail sector is not good.

“Unfortunately, things don’t look very positive,” Adibi said.

Similarly, Goldman, Sachs & Co. economist Jan Hatzius told clients this month that California “seems to be sliding into recession” based on the steep climb in unemployment in the state to 5.6% in September from 4.7% in November 2006.

The October numbers have some bright spots, showing the largest job gains statewide in education and health services, which together added nearly 51,000 jobs over the year.

And some parts of Southern California are doing better than others.

Hammered by sub-prime fallout, Orange County continues to struggle, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. The state figures show just 400 new jobs created in Orange County last month compared with October 2006.

Year-over-year job growth in Los Angeles County was up by 0.7%, or 29,700 jobs, in October, with most of the losses in construction and manufacturing, Kyser said.

But Riverside and San Bernardino counties have experienced “vigorous” job growth, up 42,600 jobs, or 3.3%, in the 12-month period, Kyser said. He attributed the boost to the area’s expanding manufacturing activity.

One sign of the state’s direction may come in next month’s jobs report, which could measure the initial effect of the writers strike. In 1988, the last time writers walked out, the region lost 20,000 jobs in the first month, Kyser said.

With 87% of the state’s motion picture employment in Los Angeles County, the hit this time could also be “fairly significant” locally, he predicted.

Kyser foresees a “gradual bounce back” after the strike ends, with rehiring in television likely to be more significant than in movie production.