California’s Labor Market Recovery Continues… But State Labor Force Contracts For Second Consecutive Month

Half of California’s Unemployed Call Their Lay Off “Temporary”

CALIFORNIA LABOR MARKET UPDATE

California’s labor market recovery continued in August, with total nonfarm employment in the state expanding by 101,900 positions, according to an analysis released jointly by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting and Development. 

One ostensibly positive sign is that the state’s unemployment rate fell to 11.4% in August, a 2.1-percentage-point decline relative to July, although this remains a far cry from the 3.9% rate enjoyed one year ago. Moreover, the unemployment rate fell for the wrong reasons. The month-over-month decline was aided by a decline in the state’s labor force, which contracted by 117,100 during the month, the second consecutive monthly decrease. From a year-over-year perspective, the state’s labor force has declined by 3.7%, a steeper drop relative to the 1.9% decline in the nation overall.

Since February, the number of people looking for work in the state has fallen by 807, 000, a sign that many workers have become discouraged and have stopped actively looking for employment. 

A possibly better sign is that 50% of the state’s unemployed workers report their layoff as temporary, and that they should be returning to work in the coming months. Notably, in April more than 70% of the state’s workers described their unemployment in these terms.    

Key Findings:

• Government was responsible for the majority of the state’s job gains in August, boosting payrolls by 66,100. Census workers employed by the Federal Government were responsible for the bulk of these, with the Federal Government increasing payrolls by 37,100 during the month. Local Government also had a strong month, with payrolls expanding by 30,700 in August, largely a result of teachers and educational workers returning to their jobs. 

• This means that private sector positions grew very modestly in August, increasing by just 35,800 during the month. Growth in private sector employment was led by Professional, Scientific & Technical Services (11,800), Administrative Support (9,700), and Transportation, Warehousing & Utilities (9,600). “With respect to private sector job growth, this was a disappointing month,”  said Taner Osman, Research Manager at Beacon Economics and the UCR Center for Forecasting. “To place this month’s figures in perspective, if we continue to add jobs at this level, it will take until 2022 to return the labor market to the position we were in in February of this year.”
  
• A handful of sectors shed jobs in August, largely a result of the re-issuance of public health mandates in many parts of the state. Leisure and Hospitality shed the most jobs, decreasing payrolls by 14,600 during the month. Other sectors posting sizeable declines were Other Services, which includes hair and nail salons (-5,700), Information (-4,300), and Management (-2,100). With public health mandates easing in September, these sectors should see a resurgence in next month’s figures. They have been the hardest hit sectors in the state during the COVID-19 pandemic, with Leisure and Hospitality (-31.2%), Other Services (-22.1%), and Information (-9.3%) leading in jobs losses, year-over-year, in percentage terms. 
  
• Regionally, job gains were spread fairly evenly across the state, but led by Southern California. San Diego saw the largest increase, where payrolls grew by 23,400 during the month. The Inland Empire (12,200), Los Angeles (MD) (7,200), Ventura (2,700), and Orange County (1,400) also added to their payrolls jump during the month. Over the past year, Orange County (-11.2%) has experienced the steepest job losses in the region, measured by percentage decrease, followed by Los Angeles (MD) (-9.5%), San Diego (-9.0%), the Inland Empire (-8.6%), and Ventura (-7.7%).
  
• In the San Francisco Bay Area, San Francisco (MD) experienced the largest increase, with payrolls expanding by 10,100 positions in August. The East Bay (9,900), San Jose (6,100), and Vallejo (2,600) also saw payrolls expand during the month. From a year-over-year perspective, the East Bay (-12.0%) has had the steepest declines in the San Francisco Bay Area, followed by San Rafael (MD) (-10.9%), Napa (-10.3%), San Francisco (MD) (-10.3%), and Vallejo (-10.1%).
  
•  In the Central Valley, Sacramento experienced the largest monthly increase as payrolls expanded by 11,500 positions in August. Payrolls in Fresno (5,700), Stockton (4,800), Bakersfield (4,600), Chico (2,100), and (Madera (1,300) increased steadily as well. Over the last year, Yuba (-12.7%) had the steepest declines followed by Modesto (-9.3%), Chico (8.6%), Bakersfield (-8.5%), Stockton (-8.4%), Sacramento (-8.4%), and Visalia (-8.4%).
  
• On California’s Central Coast, Santa Barbara added the largest number of jobs, with payrolls increasing by 4,500 during the month. Payrolls in Santa Cruz (3,700), San Luis Obispo (1,700), and Salinas (500) also increased during the month. From a year-over-year perspective, San Luis Obispo (-12.0%) shed positions at the fastest rate, followed by Salinas (-11.2%), Santa Cruz (-10.8%), and Santa Barbara (-9.0%).