State Unemployment Rate Jumps To Highest Point Since 2016; Labor Force Declines
April 17, 2020 — As expected, the latest numbers from the California EDD show that the COVID-19 pandemic and halt in economic activity is having a significantly negative impact on employment and businesses in California, according to analysis released jointly by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting and Development.
The state’s total nonfarm payrolls declined by 99,500 in March, the largest month-to-month decline since the depths of the ‘Great Recession’. It’s also important to note that the data are an employment count as of the 12th of the month, which preceded the stay-at-home order issued by Governor Gavin Newsom. As a result, these numbers are likely painting a rosier picture of the state’s actual economic conditions during the month of March.
“While the current report paints a bleak enough picture, unfortunately, things are likely even worse, and have very likely become much worse in April,” said Taner Osman, Research Manager at Beacon Economics and the UCR Center. “Just how quickly employment growth returns will depend on when stay-at-home orders are lifted, and when the state’s residents feel comfortable resuming their normal activities… but at this point, we can’t put a timeline on when this will happen.”
Despite the steep decline in California’s nonfarm payrolls in March, the state still increased payrolls by 150,400 jobs or 0.9% over the last year. This attests to the fact that California’s economy entered the crisis from a position of strength. However, this strength will be tested over the coming months as the economy nears recession.
The state’s unemployment rate jumped considerably in March, increasing by 1.4 percentage points to 5.3%. This marks California’s highest unemployment rate since August 2016. Moreover, this increase came in the face of a 251,800 decline in the state’s labor force. California’s labor force has now declined by 0.5% over the last year. Household employment also fell considerably, falling by 512,600 during the month and by 1.6% from March 2019 to March 2020.
- Government While a significant number of the state’s job sectors saw declines in March, the majority of job losses were concentrated in the Leisure and Hospitality sector, which shed 67,200 positions during the month. The steep decline pushed year-over-year growth to a 1.9% decline.
- The Other Services sector also posted significant declines in March, decreasing payrolls by 15,500. Other sectors posting large losses were Construction (-11,600), Manufacturing (-5,300), Administrative Support (-4,800), Professional, Scientific, & Technical Services (-4,400), Retail Trade (-3,200), and Wholesale Trade (-1,800).
- Despite the widespread declines in March, a significant number of sectors continued to post job gains. The Government sector posted the largest gains, increasing payrolls by 5,200. Other sectors posting gains in March were Information (2,600), Finance & Insurance (2,100), Real Estate (1,900), and Health Care (1,300).
- Over the twelve-month period from March 2019 to March 2020, the Information (5.%), Transportation, Warehousing, and Utilities (4.7%), Educational Services (3.3%), Health Care (2.8%), Real Estate (2.6%), Mining and Logging (2.2%), and Finance & Insurance (2.0%) sectors experienced the largest job gains in percentage terms. While the Leisure and Hospitality (-1.9%), Other Services (-1.5%), Manufacturing (-1.3%), Wholesale Trade (-1.2%), Management (-1.0%), and Retail Trade (-0.7%) sectors had the largest percentage declines.
- Within the state, job declines were led by Southern California. Los Angeles (MD) saw the biggest losses, where payrolls fell by 39,600 during the month. Orange County (-16,500), San Diego (-14,500), and the Inland Empire (-4,100) also shed jobs. Over the past year, El Centro (1.3%) saw the fastest job growth in Southern California, measured by percentage increase, followed by Ventura (0.9%), the Inland Empire (0.9%), Los Angeles (MD) (0.8%), and San Diego (0.8%).
- In the Bay Area, San Francisco (MD) experienced the largest declines with payrolls falling by 13,700 positions in March. San Jose (-8,400), the East Bay (-3,300), and San Rafael (MD) (-1,400) also saw payrolls decline during the month. Over the past year, Napa (2.4%) enjoyed the fastest job growth rate in the region, followed by San Francisco (MD) (1.6%), Santa Rosa (1.4%), and Vallejo (0.9%). Note that the Bay Area has seen larger relative declines because it began containment measures prior to other parts of the state.
- In the Central Valley, Sacramento experienced the largest monthly declines, where payrolls fell by 3,400 positions. Payrolls in Modesto (-500), Fresno (-500), Bakersfield (-500), and Redding (-300) declined as well. Over the past 12 months, Yuba (8.3%) has enjoyed the fastest growth in percentage terms, followed by Madera (2.8%), Bakersfield (2.3%), Visalia (1.9%), Fresno (1.8%), Stockton, (1.6%), and Modesto (1.9%).
- On the Central Coast, Santa Barbara shed the largest number of jobs, with payrolls declining by 700 positions over the month. Payrolls in Santa Cruz (-600) and Salinas (-400) also declined during the month. From March 2019 to March 2020, San Luis Obispo (2.3%) added jobs at the fastest rate, followed by Santa Cruz (1.8%), Salinas (1.2%), and Santa Barbara (0.9%).
Beacon Economics is an independent economic research and consulting firm based in Los Angeles. The UCR School of Business Center for Economic Forecasting and Development is the first world class university forecasting center in the Inland Empire. This analysis was authored by Christopher Thornberg, Taner Osman, and Brian Vanderplas. Learn more at www.beaconecon.com and www.ucreconomicforecast.org.