California Job Recovery Has Gained Momentum in 2021; State Cannot Afford Any Slowdown Due to Covid Resurgence

State’s Unemployment Rate Holds Steady As Workforce Expands

California’s labor market continued to expand at a rapid pace in June, although job growth did slow compared to the previous month, 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 grew by 74,500 positions in June, down from 94,700 in May. Note that May’s gains were revised down by 9,800 in the latest numbers (from the preliminary estimate of 104,500).

Over the past five months, the state’s economy has added 558,700 jobs, representing the fastest hiring surge since the summer of 2020. These gains are welcome since, as of June 2021, there were still 1.24 million fewer people employed in the state compared to February 2020. Total nonfarm employment in California has contracted 7.0% since this time.

This compares unfavorably to the national picture, where the labor market has shrunk by 4.4% over the same period. However, because California has further to go to reach its pre-pandemic peak relative to the nation, the state should continue to see more rapid growth in the coming months.

“While California’s labor market recovery has gained significant momentum in 2021, there is still a substantial jobs deficit compared to pre-pandemic levels and the state’s economy is lagging the national recovery,” said Taner Osman, Research Manager at Beacon Economics and the UCR Center for Forecasting. “At this juncture, with the imminent expiration of extended unemployment benefits, the state cannot afford any slowdown associated with a surge in new COVID cases.”      

California’s unemployment rate held steady at 7.7% in June, unchanged from the previous month, and the state’s labor force expanded by 35,500. California’s unemployment rate remains elevated relative to the 5.9% rate in the United States overall. Since February 2020, the state’s labor force has fallen by 534,300 workers, a 2.7% decline. 

Industry Profile

At the industry level, the largest jobs gains continue to occur in the sectors hardest hit by the pandemic. While California has made up significant ground in recent months, employment levels in many of these sectors remain far below their pre-pandemic levels.

• Leisure and Hospitality led payroll gains in June, expanding by 44,400 positions. Still, the sector has a long way to go to recover all of the jobs lost due to the economic downturn; payrolls have fallen by 482,700 (-23.5%) since its previous peak in February 2020.
• Other sectors posting strong gains during the month were Health Care (7,700), Government (7,400), Other Services (7,200), Manufacturing (4,200), and Administrative Support (3,200).
• A handful of sectors saw their payrolls decline in June. These included Construction (-3,000), Educational Services (1,700), Finance and Insurance (-900), Real Estate (-800), and Mining and Logging (-200).

Regional Profile

• Regionally, job gains were led by Southern California. Los Angeles (MD) saw the largest increase, where payrolls grew by 29,700 during the month. The Inland Empire (7,500), Orange County (4,500), San Diego (3,700), and Ventura (2,000) also saw payrolls jump during the month. The Inland Empire (73.2%) has experienced the strongest recovery in the region, measured by the percentage of jobs recovered since the depths of the labor market fallout, followed by Ventura (58.4%), Orange County (57.3%), San Diego (52.8%), Los Angeles (MD) (44.5%), and Ventura (43.3%).
• In the San Francisco Bay Area, San Francisco (MD) experienced the largest increase, with payrolls expanding by 11,900 positions in June. San Jose (2,700), Santa Rosa (1,700), Vallejo (1,200), Napa (700), and San Rafael (MD) (600) also saw payrolls expand during the month. San Rafael (MD) (64.0%) has experienced the strongest recovery in the region since the pandemic’s lows, followed by Napa (57.7%), Vallejo (54.0%), Santa Rosa (50.3%), the East Bay (47.1%), San Jose (46.9%), and San Francisco (MD) (40.3%).
• In the Central Valley, Fresno experienced the largest monthly increase as payrolls expanded by 2,200 positions in June. Payrolls in Sacramento (1,400), Visalia (900), Chico (800), Modesto (500), and Stockton (500) increased steadily as well. Since April 2020, Stockton (83.6%) has experienced the strongest recovery in the region, followed by Redding (80.5%), Madera (63.8%), Modesto (62.3%), Sacramento (62.2%), Merced (59.1%), Fresno (57.9%) and Chico (53.0%).
• On California’s Central Coast, Santa Barbara added the largest number of jobs, with payrolls increasing by 1,300 during the month. Salinas (800) and Santa Cruz (200) also saw payrolls expand during the month. Since April 2020, Santa Barbara (59.1%) has experienced the strongest recovery in the region, followed by Salinas (55.4%), San Luis Obispo (37.6%), and Santa Cruz (35.6%).