Jobless rate rises to 7.7% in state

Times Staff Writer

Unemployment in California rose for a fifth straight month to 7.7% in August, and economists predicted that a recovery wouldn’t come soon, given the depth of the Wall Street financial crisis.

It was the highest rate in just over 12 years and was tied with Mississippi’s as the third worst in the nation. Nationally, unemployment was 6.1% in August.

The rate jumped from a revised 7.4% posted for July and from 5.5% a year earlier, the California Employment Development Department reported Friday.


The state’s 17-million-person workforce lost 60,000 salaried and self-employed jobs from July to August and lost 240,000 jobs since August 2007.

“The self-employed are really feeling the pain,” said Esmael Adibi, an economist at Chapman University in Orange.

Fixing what he called the “real economy” of California -- made up of thousands of small and medium-sized businesses -- could be much more difficult than calming Wall Street with a proposed government bailout, he said.

“The real economy is like a ship. Whatever is going to turn it around is going to take a long time,” Adibi said.

Peggy Mathison, a 20-year veteran of the Southern California mortgage industry, knows something about patience in tough times. She’s been looking for a job since being laid off as a $44-an-hour independent contractor a year ago.

Now she’s struggling along with her husband, a home landscape contractor, and two grown sons to hold on to their Yorba Linda home.

“We’re down to the wire on making our mortgage payments, and that unemployment check is something we depend on,” Mathison said.

Her husband “has gone back to using his tools” as a freelancer, she said, and that’s “hit or miss.”

Mathison’s problems are emblematic of the tough times sweeping neighborhoods across the state as companies lay off workers, homeowners watch their equity shrink or disappear and 401(k) retirement funds plummet in value, said Stephen Levy, director and senior economist at the Center for the Continuing Study of the California Economy in Palo Alto.

“The unemployment numbers are a stark reminder that the economic downturn, the recession, was here before the Wall Street crisis, and will be here after the Wall Street crisis,” Levy said. “Folks are a lot less wealthy.”

And the situation is unlikely to improve any time soon, economists said. The near-collapse of the housing, mortgage and residential construction industries is contaminating the rest of the Southern California economy, said Eduardo Martinez, an economist with the Los Angeles County Economic Development Corp.

Economic weakness has spread to commercial construction, retail trade and activity in the enormous ports of Los Angeles and Long Beach, where incoming container traffic has declined for the last 13 months, he said.

The prospect of finding the bottom of the crippled housing market is getting closer, “but it’s still unknown how long it will take to get there,” Martinez said. He expects the California economy to begin turning around in 2009, but exactly when is anyone’s guess.

With Southern California plagued with half-built houses, abandoned subdivisions and foreclosed existing homes, unemployment continues to climb, exceeding statewide levels in most parts of the region. It reached 7.9% in the Los Angeles metropolitan area, up from a revised 7.5% in July and 5% in August 2007.

The Inland Empire was hit even harder, with joblessness at 9.2% in August compared with a revised 9% in July and 6.4% in August 2007. Only Orange County fared relatively better, posting unemployment of 5.8% in August, just slightly more than July’s 5.7% but well above 4.2% a year ago.

The August unemployment figures, though stark, do not reflect any local effects from the international credit crunch or a series of hurricanes that swept the Southeast, the U.S. Bureau of Labor Statistics cautioned.

The worsening state employment picture is sure to increase calls by Gov. Arnold Schwarzenegger and others for Congress to pass legislation in the next few weeks giving unemployed workers who have exhausted their benefits an additional 13 weeks of emergency relief.

The governor, in a letter this week to congressional leaders, warned that the percentage of unemployed people running out of benefits of up to $450 a week “is already higher than at the beginning of the 2001 and 1990-91 recessions.”

By the end of this year, an estimated 200,000 Californians could run out of unemployment benefits if Congress doesn’t act before recessing in October, said Maurice Emsellem, policy director of the National Employment Law Project, which advocates for the rights of low-wage workers.

“The economy is crashing,” he said. “Congress and the president need to do something for unemployed families.”