California Job Recovery Halts For First Time In Eight Months; Covid Resurgence Does Not Bode Well For Near Term Future

State Unemployment Rate Grows But Workforce Also Expands

California’s labor market saw its first loss of jobs since April, according to an analysis released jointly by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting and Development. Total nonfarm employment in the state declined by 52,200 positions over the month.

Over the course of 2020, California’s economy shed 1.4 million jobs, the first time the state has recorded an annual loss of jobs since 2009. It is important to note that annual figures will be revised and finalized by the California Employment Development Department in March and are subject to change. 

Since the depths of the labor market downturn in April, only 44% of the jobs lost in California have been recovered. In December, there were 1.5 million fewer people employed in the state than in February 2020. Total nonfarm employment has contracted by 8.3% since February. This pace of growth trails the nation overall, where the number of jobs has shrunk by 6.5% over the same period.

“Unfortunately, California’s job losses in December were not unexpected,” said Taner Osman, Research Manager at Beacon Economics and the UCR Center for Forecasting. “As the spread of Covid-19 was rampant in the state’s major population centers, business closures to contain the spread of the virus also came at the cost of jobs. The situation is unlikely to improve much in January, although, for the first time, there is some real hope, with the roll out of vaccines, that the labor market can pick up real momentum in the spring.”

California’s unemployment rate grew to 9.0% in December, up from 8.1% in the previous month, and the number of workers on the state’s unemployment rolls expanded by 163,700. California’s unemployment rate remains elevated relative to the 6.7% rate in the United States overall. At the beginning of 2020, the state’s unemployment rate stood at 3.9%, meaning it has more than doubled over the course of the year.  In a positive sign, California’s labor force continued to expand in December, growing by 72,200, as workers felt encouraged and returned to the labor market. Over the course of 2020, the state’s labor force – a measure of both those working and those who are looking for work – declined by just over half a million workers.

Industry Profile

• December’s job losses were concentrated in a just handful of sectors.
  
• Leisure & Hospitality led payroll declines in December, where the number of jobs contracted by 117,000. This ended the slow recovery that was underway in the sector. During 2020, 610,900 jobs have been lost in the sector, a decline of 30%, for the year.
  
• Other sectors posting significant declines during the month were Other Services (-11,000), a sector which includes hairdressers and nail salons, Manufacturing (-3,600), Education (-2,400), Real Estate (-2,000), and Management (-1,600).
  
• The Construction sector led payroll gains in December, increasing by 31,600 during the month. With this showing, Construction sector payrolls are up 0.3% over the last year.
  
• Other sectors posting significant gains during the month were Professional, Scientific & Technical Services (20,300), Administrative Support (10,900), Health Care (8,500), Transportation, Warehousing & Utilities (6,000), and Information (5,200).
  
• During 2020, only three sectors experienced job gains in the state: Construction (+2,900), Finance and Insurance (+11,100), and Professional Scientific & Technical Services (+2,400). The biggest job losses occurred in Leisure & Hospitality (-610,900), Educational & Health Services (-135,200) and Retail Trade (-105,000).

Regional Profile

• Regionally job declines were led by Southern California. Los Angeles (MD) saw the largest decrease, where payrolls fell by 33,400 positions during the month. Orange County (-7,800), San Diego (-3,500), Ventura (-2,700), and the Inland Empire (-2,200) also saw payrolls drop during the month. Over the past year, El Centro (-9.4%) has experienced the steepest job losses in the region, measured by percentage decrease, followed by Los Angeles (MD) (-9.1%), Orange County (-8.5%), Ventura (-8.2%), the Inland Empire (-7.2%), and San Diego (-6.9%).
  
• In the San Francisco Bay Area, San Jose experienced the largest decrease, with payrolls falling by 7,800 positions in December. San Francisco (MD) (-6,700), San Rafael (MD) (-1,400), and Santa Rosa (-1,100) also saw payrolls decline during the month. From a year-over-year perspective, the San Francisco (MD) (-9.9%) has had the steepest declines in the Bay Area, followed by the East Bay (-9.6%), San Rafael (MD) (-9.5%), Santa Rosa (-9.2%), Vallejo (-8.8%), Napa (-8.0%), and San Jose (-6.9%).
  
• In the Central Valley, Fresno and Visalia experienced the largest monthly decline in payrolls, with payrolls declining by 1,800 positions in each metro in December. Payrolls in Stockton (-700) and Modesto (-700) declined as well. Over the last year, Yuba (-14.5%) had the steepest declines, followed by Chico (-10.5%), Modesto (-8.7%), Bakersfield (-8.1%), Hanford (-7.2%), Merced (-7.0%), and Stockton (-6.9%).
  
• On California’s Central Coast, San Luis Obispo added the largest number of jobs, with payrolls increasing by 2,200 during the month. In contrast, payrolls in Santa Barbara (-300), Santa Cruz (-200), and Salinas (-200) declined during the month. From a year-over-year perspective, Santa Cruz (-13.0%) shed positions at the fastest rate, followed by San Luis Obispo (-11.6%), Salinas (-10.3%), and Santa Barbara (-7.5%).