California's jobless rate falls to 7%

California's jobless rate falls to 7%
Job seekers wait in line to meet with recruiters during a HireLive career fair in San Francisco last year. (Justin Sullivan / Getty Images)

California employers slowed the pace of hiring at the end of 2014 after spending much of the year adding jobs at a furious pace.

The state's labor market remained healthy in December, though less rosy than in earlier months, according to data from the state Employment Development Department.


Employers added just 700 net new jobs in December, after adding a near-record 83,000 the month before. But California's jobless rate continued its steady decline, falling to 7% after declining to 7.2% in November, and is now at its lowest level since June 2008. That compares with a national rate of 5.6%.

Throughout the year, California employers regularly boosted head count faster than their peers nationwide. Over the summer, the state gained back the number of jobs it had lost in the recession. Nonfarm payroll employment in December was up 320,300 jobs from a year earlier, averaging out to roughly 27,000 jobs added each month in 2014.

Despite the slow December, the momentum for job growth picked up toward the end of the year, with the state adding an average of 40,000 jobs during the last three months — double the increase of the prior three months.

"With the recession five years back in our rearview mirror, we're finally at the point where we can say we've shrugged off quite a bit of pain that occurred during those times," said Robert Kleinhenz, chief economist with the Los Angeles County Economic Development Corp.

California's overall job growth of 2.1% last year was about the same as the U.S. rate. The state added fewer jobs than it did in 2013 and 2012.

Sung Won Sohn, professor of economics at Cal State Channel Islands, said growth may be slowing because of uncertainty about the global economy. Businesses may be more cautious about making full-time hires, instead relying on part-time or temporary workers.

He pointed to the financial services sector — which encompasses the banking industry but also mortgage brokers tied to the real estate market — as being one of the weaker spots in the state's economy. The sector fluctuated throughout the year but essentially remained flat, losing 200 jobs since last December.

"The banks are just too cautious," Sohn said. "They got badly burned during the last economic downturn."

The job market may no longer be booming, said Thomas Pierce, an economics professor at Cal State San Bernardino. But current growth is more balanced and sustainable given that employers — and consumers — remain wary in the aftermath of the recession.

"That's going to have a longer-lasting effect on people's psyches," he said. "It means moderate increases in spending over the next several years, as opposed to a real burst or explosion of spending."

Economists called the slow growth in December an aberration that would likely be revised when the government makes adjustments to its data in March. Year-over-year data and longer term trends are more meaningful, they said.

"By and large, you take the average and it feels very good," said William Yu, an economist at the UCLA Anderson Forecast.

A separate government gauge, which surveys metropolitan areas across the state, found that the total number of jobs rose 23,400 from November to December. The October-to-November period saw an increase of 71,200 jobs.

Employers in sectors such as construction, professional and business services, and leisure and hospitality entered 2015 with strong year-over-year job gains. Industries such as manufacturing continued to lag.


Mark Vitner, a managing director and senior economist at Wells Fargo, said slow growth in middle-wage sectors such as manufacturing reflects one of the state's central conundrums.

"When you look at the industries that are leaving California, it tends to be those ones that employ people in the middle," Vitner said. "That's a big challenge, because when you create the high-end jobs, you're really putting the demand for lower-end services into overdrive."

The decline of steady middle-class jobs in industries such as manufacturing has led to more volatility in the job market, as more people have turned to lower-paying jobs in retail and restaurants, or to freelance work and self-employment, economists said.

"Those good jobs all vaporized during the collapse of the economy, and slowly people gave up the prospect of getting them back," said Jay Prag, associate professor of economics at Claremont Graduate University in Claremont. "I do think we've recovered the jobs, but I don't think we've recovered the wages."

Geography also remained a major factor in how the recovery is playing out across the state. Job growth is, as it has been for months, still strongest in the San Francisco and Silicon Valley technology hubs.

Eleven major metropolitan areas have surpassed their pre-recession employment peaks; some, such as San Diego, expanded head counts more than 3% over the past 12 months.

Orange County enjoyed a 2.3% year-over-year growth spurt in jobs in December. Ventura saw a 2% rate, while the Inland Empire got a 1.9% boost.

Los Angeles County, which this year is expected to recover the jobs it lost in the downturn, grew jobs at a rate of 1.7% year over year in December. But tourism and trade is improving, as hotel occupancies reach record levels and port and airport traffic stretch toward new peaks. Film industry employment is on the upswing.

Another potential boon to California's job growth: falling oil prices, which could lower consumer prices and the cost of doing business in the energy-guzzling state.

"The downside is pretty small and the upside is pretty big," said Bill Watkins, who directs the Center for Economic Research and Forecasting at California Lutheran University in Thousand Oaks. "It's like a huge tax cut for most people."