Outlook weak as state’s jobless rate hits 6.9%
California’s jobless rate crept ahead Friday as experts saw weakness spreading into new areas of the economy.
For months, job losses were concentrated in the state’s housing industry. But with June’s increase of one-tenth of a percentage point to 6.9%, it was evident that a broader downturn is underway.
In all, the state lost 12,800 jobs in June compared with May. The number of government workers fell 6%, while professional and business positions declined 5.2%, manufacturing 4.4% and the information sector, which includes television and film production, 2.6%. Retail trade dropped 2.5%, according to an analysis of state figures by Beacon Economics, a Los Angeles consulting firm.
Construction, which led the decline in previous months, dropped 2.1% in June.
“The June data give the first indication that job losses are now more and more being caused by consumers slowing down their spending and not just the sharp housing losses,” said Stephen Levy, director and senior economist at the Center for the Continuing Study of the California Economy in Palo Alto.
The weakness is likely to be exacerbated by high energy prices cutting into people’s buying power, economists predict.
They point to reports of corporate layoffs that have been vying with the presidential campaign for public attention this summer. Late last month, Bank of America Corp. said it would slash 7,500 jobs over two years as the result of its acquisition of Calabasas-based Countrywide Financial Corp.
This month, Starbucks Corp. said it planned to close 88 California outlets, employing more than 1,500 baristas. Century City-based Northrop Grumman Corp. halted plans to hire 750 engineers after the Pentagon decided to rebid a $35-billion air tanker contract it had won earlier. Tribune Co. of Chicago is in the process of laying off 250 workers at its flagship newspaper, the Los Angeles Times.
The cavalcade of grim news is prompting John Menou, an unemployed Corona bricklayer, to hunker down for the hard times. “I’m gearing up for the worst,” he said.
“We’re tightening the screws in terms of buying things,” said the married father of three boys, ages 6 to 12.
Menou, 45, has been out of work for six weeks, about three times longer than he usually spends between jobs at large commercial, industrial or government construction sites in Southern California.
“We’re going to go through another heavy-duty recession like in 1992,” he said.
California’s jobless rate is now 1.6 percentage points higher than it was in June 2007 and at the worst level since October 2003, according to data from the state Employment Development Department. It is tied with Mississippi in having the country’s third-highest unemployment rate.
California is one of a dozen states with jobless rates over 6%. The widespread doldrums prompted Congress on July 1 to extend eligibility for unemployment benefits to 39 weeks from 26, said Maurice Emsellem, a policy director for the National Employment Law Project in Oakland. As many as 1.6 million Californians may qualify for the extended benefits.
The jobs picture in the Los Angeles-Long Beach-Glendale metropolitan area topped the statewide numbers in June. The unemployment rate there jumped to 7% from 6.7% in May, 2 percentage points higher than a year earlier.
Over the last year in Los Angeles, employment dropped 7.2% in construction, 7% in motion picture and sound recording and 3.3% in the financial sector.
In the Inland Empire, job losses have been steeper. June unemployment hit 8% in Riverside and San Bernardino counties, up half a percentage point from May and 2.1 points from June 2007. In Orange County, the monthly unemployment rate rose four-tenths of a percentage point to 5.2% in June, up 1.2 points in a year.
The dearth of construction work across the region signals that the paralysis besetting residential construction is spreading to previously immune commercial projects, Chapman University economist Esmael Adibi said.
“We haven’t been hit with the brunt of the construction cutback yet,” he said. “Job losses are going to accelerate at least through this year.”
Howard Roth, chief economist for the governor’s finance department, said the 12,800 net job loss in California from May to June, though “not huge,” provided concrete evidence that “the economy is still decelerating,” with damage spreading to heretofore untouched areas.
Particularly surprising, Roth said, was the news that governments lost 6,500 jobs in June. The state accounted for 5,300 of them, and more cutbacks are expected through the summer and fall as Gov. Arnold Schwarzenegger and lawmakers struggle to fill a $15.2-billion hole in the state budget for the fiscal year that began July 1.
Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said the elimination of government jobs “is a very bad sign.” Civil service jobs traditionally have been “an engine of growth,” Kyser said, “but now, they may become a brake on the economy.”
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