Labor Force Declines For 2nd Consecutive Month
June 21, 2019—LOS ANGELES, CALIFORNIA—Nonfarm employment in California continued to grow at a modest pace, increasing by 19,400 jobs in the latest numbers from the California Employment Development Department, according an analysis released jointly by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting and Development. If looking just at the sum of the state’s metropolitan areas, however, nonfarm payrolls grew at a more robust pace, expanding by 37,900 jobs.
From a year-over-year perspective, California added 282,700 jobs as of May 2019 (most recent numbers). This is equivalent to a 1.6% year-over-year increase, which matches the 1.6% growth rate in the nation as a whole. “This rate of growth represents a substantial slowing from the pace the state experienced a few years ago,” said Christopher Thornberg Founding Partner of Beacon Economics and Director of the UC Riverside School of Business Center for Economic Forecasting. “The problem isn’t labor demand, the economy is still very strong. The slowing is being driven by labor supply shortages that stem from California’s housing supply crisis.”
The state’s unemployment rate has remained largely unchanged over the last year and dipped to 4.2% in May. California’s labor force declined by 49,800 in the latest numbers, and combined with the 51,800 decline in April, has erased much of the labor force gain from earlier in the year. Despite the loss, on a year-over-year basis, the California’s labor force still grew a very slow 0.7%, equivalent to an increase of 136,400, less than half the pace of job growth in the state.
- Health Care led the way in terms of April’s job gains, increasing payrolls by 15,100 or nearly one-third of the monthly gains for the entire state. The strong month of payroll gains pushed year-over-year growth in this sector to 2.9%, well above the 1.6% average in the state overall. Leisure and Hospitality also had a strong month, increasing payrolls by 12,100. Year-over-year gains for Leisure and Hospitality now stand at a healthy 2.1%.
- Other sectors posting strong gains for the month were Administrative Support (+3,600), Government (+3,500), Wholesale Trade (+2,400), and Construction (+2,400). In percentage terms, Information led all industries with a 3.5% yearly gain, followed by Professional, Scientific, and Technical Services at 3.2% and Health Care at 2.9%.
- Despite the broad-based growth in the state last month a handful of sectors saw payrolls decline in April. Retail Trade experienced the steepest decline, decreasing payrolls by 2,100. With this drop year-over-year gains for this sector remain negative, with payrolls declining by 0.5% relative to the same month last year. Finance and Insurance (-700) and Information (-600) were the only other major sectors that saw a decrease in payrolls in April.
- Regionally, growth was surprisingly concentrated in Southern California. The Los Angeles (MD) led the way, boosting payrolls by 18,300. That was followed by growth in the Inland Empire (+6,700), San Diego (+5,000), and Orange County (+4,700). From a year-over-year perspective, the Inland Empire (+1.5%) saw the fastest growth. This was followed by growth in San Diego (+1.4%) and the Los Angeles (MD) (+1.1%), with both Orange County and Ventura County at 1.0%.
- In the San Francisco Bay Area, the East Bay led the pack increasing payrolls by 3,800. This was followed by San Jose (+3,400), San Francisco (MD) (+2,000), and Santa Rosa (+1,600). From a year-over-year perspective, San Francisco (MD) (+3.6%) was the fastest growing, followed by San Rafael (MD) (+2.7%), San Jose (+2.6%), and the East Bay (1.8%).
- In the Central Valley, Sacramento led the way, increasing payrolls by 3,000. Job gains in Sacramento were followed by Fresno (+1,100), Bakersfield (+600), and Hanford (+300). From a year-over-year perspective, Fresno (+3.8%) was the fastest growing, followed by Sacramento (+2.8%), Bakersfield (+2.2%), and Madera (+2.1%).
- On the Central Coast, Salinas topped the list, boosting payrolls by 800. Payrolls also grew in Santa Cruz (+400) and San Luis Obispo (+300) last month, but fell by 100 positions in Santa Barbara. From a year-over-year perspective, Salinas (+3.2%) added jobs at the fastest rate, followed by Santa Barbara (+2.2%), Santa Cruz (+1.9%), and San Luis Obispo (+1.4%).
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, Robert Kleinhenz, and Brian Vanderplas. Learn more at www.beaconecon.com and www.ucreconomicforecast.org.