California Outpacing Nation in Employment Growth in 2021; State Recovery Still Lags Nation Overall, But More Rapid Expansion Expected Over Summer

Unemployment Rate Holds Steady As State Labor Force Increases

California’s labor market continued to expand at a rapid pace in May, 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 104,500 positions over the month and California accounted for 18.7% of the 559,000 net jobs added in the nation. In addition to California’s strong monthly gains in May, April’s gains were revised up to 102,000 in the latest numbers, a +200 increase from the preliminary estimate of 101,800.

Over the past four months, California’s economy has added close to 500,000 jobs, representing the fastest hiring surge since summer 2020. These gains are very welcome since, as of May 2021, there were still 1.31 million fewer people employed in California than in February 2020. Total nonfarm employment in the state has contracted 7.4% since that time. This compares unfavorably to the national picture, where the labor market has shrunk by 5.0% over the same period. Given that the state fully reopened its economy on June 15th, the recent surge in hiring is expected to continue over the summer. And because California’s labor market recovery has lagged the nation’s, the state should see more rapid growth (relative to the U.S.) in the coming months.

California’s unemployment rate fell to 7.9% in May, a 0.1 percentage-point decline from the previous month, and the state’s labor force expanded by 12,400. California’s unemployment rate remains elevated relative to the 5.8% rate in the United States overall. Since February 2020, the state’s labor force has fallen by 525,400 workers, a 2.7% decline.

“It has been an encouraging few months, with employment growth in California outpacing the rate of growth nationally in 2021,” said Taner Osman, Research Manager at Beacon Economics and the UCR Center for Forecasting. “Although the labor market recovery in the state lags the nation overall, the recent reopening of California’s economy will hopefully go some way towards closing that gap.”

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 the gains in May, with payrolls expanding by 62,300. Still, the sector has a long way to go to recover all the jobs lost due to the economic downturn, with payrolls having fallen by 517,500 (-25.1%) since their previous peak in February 2020.
  
• Other sectors posting strong gains during the month were Information (11,200), Health Care (9,500), Education (7,000), Wholesale Trade (4,300) , and Administrative Support (3,600).
  
• A handful of sectors saw their payrolls decline in May. These included Transportation, Warehousing & Utilities (-1,900), Construction (-1,600), Retail Trade (-1,300), and Mining and Logging (-300). 

Regional Profile

• Regionally, job gains were led by Southern California. Los Angeles (MD) saw the largest increase, where payrolls grew by 30,600 during the month. Orange County (23,200), the Inland Empire (6,000), and Ventura (1,200) also saw their payrolls jump during the month. Since the pre-pandemic peak in February 2020, Los Angeles (MD) (-10.0%) has experienced the steepest job losses in the region, measured by percentage decrease, followed by San Diego (-8.2%), Ventura (-7.7%), Orange County (-7.3%), El Centro (-6.3%), and the Inland Empire (-4.2%).
  
• In the San Francisco Bay Area, San Francisco (MD) experienced the largest increase, with payrolls expanding by 6,000 positions in May. The East Bay (4,600), San Jose (3,900), Napa (1,800), and Santa Rosa (1,100) also saw payrolls expand during the month. Since the pre-pandemic peak in February 2020, San Francisco (MD) (-10.6%) has had the steepest declines in the Bay Area, followed by Santa Rosa (-9.9%), the East Bay (-8.5%), Napa (-8.4%), Vallejo (-8.4%), San Rafael (MD) (-8.3%), and San Jose (-7.0%).
  
• In the Central Valley, Sacramento experienced the largest monthly increase as payrolls expanded by 2,600 positions in May. Payrolls in Fresno (1,300), Stockton (1,000), Bakersfield (700), Hanford (600), and Yuba (400) increased steadily as well. Since the pre-pandemic peak in February 2020, Chico (-8.8%) has experienced the steepest declines, followed by Bakersfield (-7.4%), Visalia (-7.0%), Yuba (-6.2%), Fresno (-5.7%), Hanford (-5.5%), and Sacramento (-5.1%).
  
• On California’s Central Coast, Salinas and San Luis Obispo added the largest number of jobs, with payrolls increasing by 500 in each region during the month. Santa Cruz (-200) and Santa Barbara (-100) saw payrolls decline during the month. Since the pre-pandemic peak in February 2020, Santa Cruz has shed positions at the fastest rate (-12.7%), followed by San Luis Obispo (-11.7%), Salinas (-9.1%), and Santa Barbara (-7.7%).