California's surprising resilience earlier this summer is fading as a slow global and U.S. economy damp the state's job prospects.
The state's payrolls posted a lackluster net gain of 12,000 jobs in August, according to data from the Employment Development Department. Further, July's job gains were revised downward to 17,900 from 25,200 as originally reported.
Hiring helped push down the jobless rate only slightly to 10.6% last month from 10.7% in July.
"California continues to post sustained job growth, faster than the nation but slower than we hoped for," said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto.
Early this summer, the Golden State had been bucking the national trend of weak job growth. In May and June, employers added 90,000 jobs — nearly equal to the monthly gain the U.S. made last month.
But a slowing Chinese economy and the European debt crisis caused a decline in American exports, which is now affecting California. Direct exports to both regions account for 25% of the state's total exports, and a UCLA economic forecast released this week said the state would be hit hard if economic conditions abroad worsen.
"We're doing better than the nation because tech, trade and tourism are reviving our economy, but we are linked to the trends that affect the nation," Levy said.
Employers across six industries added jobs, with education and health services posting the largest month-over-month increase with 8,900 jobs.
The brightest spot in the report is that the beleaguered construction industry has continued its recent growth. Payrolls in that hard-hit sector gained 5,100 jobs. The state has begun seeing a turnaround in the housing market, particularly an uptick in permits for multi-unit housing projects.
The leisure and hospitality industry, which grew largely because of the summer tourism season, added 4,400 jobs.
Private industry employment has fared better during the recovery. Last month, private payrolls added 19,400 jobs. Those gains, however, were offset by losses in other industries such as professional and business services, which lost 2,300 jobs.
The steepest losses were in government, which has been in decline for months as state and local municipalities struggle with falling tax revenues. That sector shed 7,400 jobs last month, primarily in education as schools were on summer break.
In the last year, California payrolls have grown by almost 299,000 jobs, a growth rate of 2.1% compared with the nation's 1.4%. The unemployment rate has fallen 1.3 percentage points since August 2011, according to the state employment agency.
A weak labor market also caused the number of people looking for jobs to contract by 65,000 in August, economists said. Many discouraged job seekers have stopped their searches, while others like Steve Baca Jr. are returning to school to beef up their skills.
Baca, 51, had been working as a general laborer when he was laid off six months ago. The Moreno Valley resident has since enrolled in community college and is taking courses to become a computer technician.
Looking for work, he said, has "been rough. It's why I went back to school."
Although the state still outpaces the U.S., a hiring binge is unlikely soon as skittish employers wait for economic conditions to improve.
"They're taking a wait-and-see attitude" before hiring, said Esmael Adibi, director of Chapman University's A. Gary Anderson Center for Economic Research. "Employers are worried about the slowdown in Asia and Europe."
Also looming is the so-called fiscal cliff at the end of the year, when several tax cuts will expire and automatic spending cuts kick in if Congress does not act. If no action is taken, the country could fall into another recession, UCLA economists warned this week.
Despite the worst-case scenarios of a Eurozone implosion and the looming fiscal cliff, economists said the state should continue posting growth.
August "shows very little progress," said Jerry Nickelsburg, a UCLA economist. "But it does not show us moving backward either."
In Los Angeles employers shed 10,400 jobs in August, primarily in government. The county's seasonally adjusted unemployment rate fell to 11% from a revised 11.2% the month before.
Orange County lost 5,200 jobs, primarily in education, and its unemployment rate was 7.7%. And the Inland Empire, which includes Riverside and San Bernardino counties, gained 10,800 jobs; its unemployment rate was 12.3%, down from 12.7% the month before.
California has the third-highest unemployment rate, behind Nevada — which saw its jobless rate rise to 12.1% in August — and Rhode Island at 10.7%.