California Labor Market Expansion Continues Amid Omicron; State’s Unemployment Rate Dips Despite Growth in Workforce in Latest Numbers

Uneven Recovery Among Industry Sectors Persists 

California’s labor market continued to expand at a steady pace in December, with total nonfarm employment in the state growing by 50,700 positions over the month, according to an analysis released jointly by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting and Development. California’s growth accounted for just over one-quarter of the nation’s overall job gains for the month. California’s gains in November were also revised up to 52,200 in the latest numbers, a 6,500 increase from the preliminary estimate of 45,700.

While California added jobs at a healthy pace in 2021, as of December 2021, the state has recovered just 72% of all the jobs lost in March and April 2020, and there are now 768,600 fewer people employed in California compared to February 2020. Total nonfarm employment in the state has contracted 4.4% since the pandemic crisis began compared to a 2.3% drop nationally. However, during 2020, California added jobs at a faster rate than the national economy. Payrolls in the state expanded 6% from December 2020 to December 20201, well above the 4.5% increase nationally over the same period.

“Many states have fully recovered the jobs they lost during the pandemic,” said Taner Osman, Research Manager at Beacon Economics and the UCR Center for Forecasting. “Since California is still playing catch-up, we expect to see stronger job growth in 2022 compared to the nation overall.”

California’s unemployment rate fell to 6.5% in December, a 0.5 percentage-point decline from the previous month. However, the state’s unemployment rate remains elevated relative to the 3.9% rate in the United States overall. California’s labor supply has contracted significantly since the start of the pandemic. Despite an expansion of 30,200 workers in December, since February 2020, the state’s labor force has shrunk by 358,100 workers, a 1.8% decline.

Industry Profile

While some sectors have recovered all the jobs lost during the pandemic, in many industries, there are still far fewer workers employed compared to pre-pandemic levels.

• Leisure and Hospitality led gains in December, with payrolls expanding by 15,000. This is welcome news as the sector still has a long way to go to recover all the jobs it lost due to the pandemic. Payrolls remain down 15.3% compared to February 2020.
  
• Other sectors posting strong gains during the month were Professional, Scientific, and Technical Services (8,900), Transportation, Warehousing, and Utilities (7,200), Health Care (4,700), Government (4,100), Administrative Support (3,200), Information (3,100), and Other Services (3,000).
  
• Sectors such as Professional, Scientific, and Technical Services and Transportation, Warehousing, and Utilities have been major drivers of job growth in the state, with payrolls up 3.9% and 9.0%, respectively, compared to pre-pandemic levels.
  
• Job gains were broad based in December with Retail Trade (-7,300) and Management (-100) being the only sectors to post losses during the month.

Regional Profile

• Regionally, job gains were led by Southern California. Los Angeles (MD) saw the largest increase, where payrolls grew by 27,900 (0.6%) during the month. Orange County (7,900 or 0.5%), the Inland Empire (4,400 or 0.3%), San Diego (4,200 or 0.3%), and Ventura (1,300 or 0.4%) also saw their payrolls jump. The Inland Empire (84.5%) has experienced the strongest recovery in Southern California, measured by the percentage of jobs recovered since the pandemic lows. The IE is followed by Orange County (73.7%), San Diego (68.6%), Ventura (67.8%), El Centro (65.0%), and Los Angeles (MD) (63.9%).
  
• In the San Francisco Bay Area, San Jose experienced the largest increase, with payrolls expanding by 7,200 (0.6%) positions in December. San Francisco (MD) (7,000 or 0.6%), the East Bay (6,400 or 0.6%), Vallejo (800 or 0.6%), and Santa Rosa (500 or 0.3%) also saw payrolls expand during the month. Since April 2020, the pandemic lows, San Rafael (MD) (73.3%) has experienced the strongest recovery in the region, followed by San Jose (72.7%), Napa (63.4%), Santa Rosa (63.3%), Vallejo (62.8%), San Francisco (MD) (61.2%), and the East Bay (58.3%).
  
• In the Central Valley, Sacramento experienced the largest monthly increase, as payrolls expanded by 2,500 (0.2%) positions in December. Payrolls in Fresno (2,400 or 0.7%), Stockton (800 or 0.3%), Modesto (500 or 0.3%), Madera (300 or 0.8%), Merced (300 or 0.4%), Yuba (300 or 0.6%), and Redding (200 or 0.3%) increased steadily as well. Since April 2020, Redding (101.3%) has experienced the strongest recovery in the region, followed by Stockton (90.7%), Yuba (83.0%), Fresno (81.2%), Modesto (77.6%), Sacramento (76.2%), and Madera (74.5%).
  
• On California’s Central Coast, Santa Cruz added the largest number of jobs, with payrolls increasing by 1,600 (1.7%) during the month. Santa Barbara (1,200 or 0.6%), Salinas (900 or 0.6%), and San Luis Obispo (300 or 0.3%) also saw payrolls expand during the month. Since the lows of April 2020, Salinas (78.6%) has experienced the strongest recovery in the region, followed by Santa Barbara (74.7%), Santa Cruz (57.6%), and San Luis Obispo (56.1%).