California’s moribund construction and real estate industries helped push the state unemployment rate to 6.8% in May, its highest level in nearly five years.
The state Employment Development Department reported Friday that joblessness in May rose six-tenths of a percentage point from the previous month and was a dramatic 1.5 percentage points higher than in May 2007.
And the outlook is likely to get worse for California -- at least for the rest of the year, experts said. Economic concerns, fueled by higher oil prices, also sent stocks lower Friday, with the Dow Jones industrial average falling 220.40 points to 11,842.69, the lowest level in three months.
“Although some forecasting groups continue to debate whether or not the economy is heading into a recession, these numbers should make it perfectly clear that the state is already in a recession,” Beacon Economics, a Los Angeles-based research firm, said in an analysis of the jobless data. “The only question now is, how long and how bad will it be?”
Other economists noted that California’s seasonably adjusted unemployment increase, although large, wasn’t unexpected. It roughly paralleled a half-percentage-point rise in the national rate, which increased to 5.5% in May, as previously reported.
California’s May unemployment rate was the fifth-highest in the nation, behind Michigan, Rhode Island, Alaska and Mississippi, according to the U.S. Bureau of Labor Statistics.
The total number of unemployed people in California last month was 1.26 million, up 115,000 from the previous month and 300,000 higher than in May 2007.
The report said California posted a net loss of 10,900 jobs in May from the month before, mostly in residential and commercial construction. Workers who once made good wages in California’s formerly booming real estate market say they’re frustrated and increasingly desperate.
“Absolutely, it’s getting worse,” said Debbie Smith, who worked as an office manager for a real estate magazine publishing company in Ventura before being laid off last September. “There’s nothing out there, believe me.”
Smith said she had only one strong job possibility in the last nine months, but “it fell through, I think, because I’m 54.”
The dropoff in real estate and construction also plagued the Los Angeles metropolitan area, where unemployment rose to 6.7% in May from a revised 5.9% in April and 4.9% a year earlier. At a time of year when building traditionally is in full swing, the number of construction jobs was off half a percentage point for the month and 6.7% from May 2007.
Employment in the motion picture and sound recording sector rose 1.7% in May but was down 4.4% from May 2007.
“There’s a hesitancy at the major studios to start a big production,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. Filmmakers are worried about a possible actors strike, he said.
Even if the economy picks up toward the end of the year, gains could be undermined by losses of state and local government jobs if Gov. Arnold Schwarzenegger and the Legislature slash spending to fill a projected $15.2-billion hole in the budget for the fiscal year that begins July 1. Cuts in state funding would dictate reductions in payrolls for counties, cities, colleges and universities, and public schools.
“We see a long period of continued sluggishness driven by the late innings of the housing slowdown, followed by Sacramento-driven government” reductions, said Ryan Ratcliff, an economist at the UCLA Anderson School of Business.
Stephen Levy, director and senior economist with the Center for the Continuing Study of the California Economy in Palo Alto, agrees that a jobs recovery is at least a year off. He called the May 6.8% unemployment figure “an eye-catcher” but cautioned that last month’s sharp rise might be somewhat out of whack. The actual number of job losses were too low to justify the size of the increase, Levy said.
“I wouldn’t be surprised if it got bumped down,” he said, noting that economists routinely revise preliminary estimates after they’ve had more time to analyze data.
The employment scene, though mostly grim, is not all bad. Some industries gained in May, adding a net 9,000 jobs, including in education and health services, natural resources and mining, and information.
In Los Angeles, the leisure-and-hospitality business created 1,300 new jobs in May as the region geared up to welcome summer visitors. Although its overall unemployment rate increased, San Francisco gained 2,300 jobs at restaurants, hotels and entertainment centers.
And even heavy construction work could pick up next year as dirt begins flying on tens of billions of dollars’ worth of building on roads, schools and public projects financed by voter-approved bonds.
In the meantime, out-of-work people, worried that unemployment benefits may soon run out, will probably get a little help. Congress is expected to pass legislation to extend unemployment benefits to nine months from six, and President Bush is expected to sign it, said Andrew Stettner, deputy director of the National Employment Law Project, a research and advocacy group for lower-wage workers.
But those few bright spots bring no solace to Howard Roth, chief economist at the state Finance Department.
“The jury is still out on whether housing is getting better by the end of the year. We’re still going to be up to our necks in foreclosures,” he said. “The economy continues to sputter along.”