A RECORD BREAKING MONTH OF DECLINES; COVID-19 CLOSURES SLAM CALIFORNIA EMPLOYMENT

State Unemployment Rate Jumps To Highest On Record As Labor Force Shrinks; Silver Lining: Three-Quarters Say They Are ‘Temporarily’ Unemployed

May 26, 2020 — The public health mandates implemented in response to the COVID-19 pandemic are having a devastating effect on the labor market in California. Total nonfarm employment in the state declined by 2,344,700 positions in April, the largest month-to-month decline on record, according to an analysis released jointly by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting and Development.

This enormous decline in payrolls pushed California’s year-over-year employment growth to -13.4%, the largest annual decline on record. The state performed slightly worse than the national economy, where nonfarm employment declined by 12.9% over the same period.

Even in the midst of a pandemic, however, every cloud may have a silver lining: Around 75% of workers who have been laid off in the state report that they are temporarily unemployed, and the hope is that many will return to their prior jobs as communities across the state begin to re-open. That said, the road back to the unemployment rate the state was enjoying in February (3.9%), is long. The pain of worker dislocation has been eased by Federal and state assistance, but much like the search for a vaccine for the Novel Coronavirus (COVID-19), the cure for the disruption caused to the lives of hundreds of thousands of workers in the state will not be found quickly.

In April, the number of unemployed workers in California increased to 2,885,300, over two and half times the level seen one month earlier. From March to April, 1.8 million workers were added to the state’s unemployment ranks, with the unemployment rate swelling from 5.5% in March to 15.5% in April (the highest on record).

“As extraordinary as these numbers are, they will likely get worse before they get better,” said Taner Osman, Research Manager at Beacon Economics and the UCR Center. “Despite the gradual re-opening of the economy, numbers from the Federal government suggest the ranks of the unemployed have continued to swell throughout May.”

Moreover, the alarming figures understate the true extent of worker dislocation. Over the month, 600,000 workers have left the labor force in California, or in other words, have become discouraged and stopped their search for employment. As such, these residents are not officially counted among the unemployed. In fact, since February 2020, nearly one million workers (947,800) have left the labor force in the state. If these workers were included among the unemployed, and after all, they were either employed or were looking for work just two months ago, the state’s unemployment rate would have been around 21% in April. Since February, the state’s labor force has contracted by 5%.

The disruption has been felt more severely in some industries than others.

Key Findings:

• The Leisure and Hospitality sector led job declines in April, shedding 866,200 positions. This translates into an extraordinary drop of 44% in one month for the sector. Accommodation and Food Services was responsible for the majority of these job losses, where 732,800 positions were lost. As parts of the economy opens up, many of these jobs will return, but the impact of the public health mandated closures, especially the suppressed levels of inter-regional and international travel, means that a significant number of the jobs in these sectors will be slow to recover. The Health Care and Leisure and Hospitality sectors also saw strong employment growth in October, adding 4,800 and 4,600 jobs, respectively. The Finance and Insurance (2,800), Real Estate (2,500), Manufacturing (2,300), Wholesale Trade (2,200), and Construction (2,100) sectors also posted gains in October.
• Other sectors posting sizeable declines in April were Retail Trade (-275,200 or 17% of all jobs), Health Care (-246,500 or 10%), Administrative Support (-150,400 or 13%), Other Services (-142,500 or 28%), and Construction (-132,100 or 15%).
• The state’s highest paying sectors have not been immune, although the declines in these sectors have been less pronounced. In the Professional and Business Services sector 242,800 (-9%) jobs were shed during the month. This included nearly 80,000 (-6%) jobs lost in Professional, Scientific and Technical Services. In the Information sector, the number of jobs fell by 40,500 (-7%) during the month. These represent extraordinary declines in some of the state’s most prized industries.
• Regionally, job declines were concentrated in Southern California. Los Angeles (MD) saw the biggest drop, where payrolls fell by 691,300 during the month. Orange County (-226,200), San Diego (-197,600), and the Inland Empire (-147,600) also shed a significant number of jobs during the month. Over the past year, Orange County (-15.5%) saw the steepest job losses in the region, measured by percentage decrease, followed by Los Angeles (MD) (-14.8%), San Diego (-13.2%), Ventura (-11.8%), and the Inland Empire (-9.5%). In a reversal from what occurred during the Great Recession, the inland parts of the states have not been hit as badly as coastal communities.
• In the San Francisco Bay Area, the East Bay experienced the largest declines, where payrolls fell by 171,800 positions in April. San Francisco (MD) (-169,500), San Jose (-128,100), Santa Rosa (-40,000), Vallejo (-18,400), San Rafael (MD) (-16,800), and Napa (-10,500) also saw payrolls decline during the month. Over the past year, Santa Rosa (-18.1%) had the steepest declines in the region, followed by the East Bay (-14.9%), San Rafael (MD) (-14.2%), and San Francisco (MD) (-13.6%).
• In the Central Valley, Sacramento experienced the largest monthly declines as payrolls contracted by 149,800 positions. Payrolls in Bakersfield (-30,900), Fresno (-30,400), Stockton (-27,000), Modesto (-23,000), and Visalia (-10,000) declined as well. Over the last year, Sacramento (-14.1%) had the steepest declines followed by Redding (-14.0%), Modesto (-11.6%), Bakersfield (-10.3%), Stockton (-10.3%), Merced, (-9.9%), and Chico (-9.9%).
• On California’s Central Coast, Salinas shed the largest number of jobs, with payrolls declining by 21,800 over the month. Payrolls in Santa Barbara (-21,200), Santa Cruz (-19,100), and San Luis Obispo (-19,000) also declined during the month. From a year-over-year perspective, Santa Cruz (-20.4%) shed positions at the fastest rate, followed by San Luis Obispo (14.4%), Salinas (-14.1%), and Santa Barbara (-11.7%).