Good News Tempered: Resurging Virus, Expected to Drag Down July and August Numbers; California Unemployment Rate Declines Modestly
July 17, 2020 — In June, as public health mandates to contain the spread of the novel coronavirus were eased, California saw the largest month-over-month job increase on record, with the addition of 558,200 positions, according to an analysis released jointly by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting and Development.
Any exuberance should be tempered, however, since there are still roughly two million fewer jobs in the state than at the peak prior to the pandemic. Furthermore, the resurging spread of the virus in the state has led Governor Newsom to reimplement many business closures. A stable and ongoing economic recovery cannot occur until the virus is contained in the state and the nation, according to the analysis.
“Despite June’s strong numbers, we’re unlikely to see the labor market’s recovery continue at such a pace,” said Taner Osman, Research Manager at Beacon Economics and the UCR Center for Forecasting. “The number of jobs added will likely represent the high mark until the virus in the state is contained. The strongest job gains were seen in Leisure and Hospitality, and these are the very sectors that will be hit the hardest by health-mandated business closures.”
In June, year-over-year employment growth in California stood at -10.0%, a decline of 1.7 million positions, the third largest annual decline on record, only trumped by the figures in April and May. The state fared worse than the nation, where nonfarm employment declined by 8.6% over the same period.
From June 2019 to June 2020, 2.1 million workers were added to the state’s unemployment ranks, which means in June, the unemployment rate stood at 14.9%, a relatively modest decline from the 16.3% rate recorded in May. California’s June unemployment rate is higher than the national figure of 11.1%. The number of unemployed Californian’s is over three and half times the level seen one year earlier, at 2,831,031.
On a positive note, the state’s labor force surged by 441,200 people in June, as encouraged workers rejoined the labor force. That said, state’s labor force has declined by 433,000 over the past year, although the strong month cut the pandemic declines by just over half.
- As Leisure and Hospitality led job losses in April, the sector led job gains in June, increasing payrolls by 292,500. This sector accounted for 52% of all job gains in California for the month. Both Accommodation and Food Services (242,500) and Arts and Entertainment (50,000) added to their payrolls by healthy margins in June. However, Leisure and Hospitality has significant ground to make-up, with payrolls falling 30% from June 2019 to June 2020. The re-implementation of restrictions on inside dining and bars will likely negatively affect the industry in July.
- The easing of public health mandates also allowed a significant number of Retail establishments to open their doors, which increased payrolls by 71,300 in June. Other Services – which includes hair and nail salons – also benefited from the easing of public health mandates, adding 27,700 positions during the month. However, the reimplementation of businesses closures will hit Retail Trade and Other Services in July and August.
- Sectors that were not as impacted by the public health mandates also expanded in June. Construction (+26,800) and Manufacturing (+23,400) grew by significant margin, and importantly, these gains should not be impacted by the reimplementation of closures. These sectors also have ground to make up before returning to pre-recession levels, however, with payrolls in Construction (-4.5%) and Manufacturing (-7.6%) down over the last year.
- Government was the only sector to post declines in June as payrolls decreased by 36,300 positions during the month. State Government was responsible for the bulk of the declines, with payrolls falling by 30,200 in June. Government positions have been slightly more insulated from the fallout of the COVID-19 pandemic than those in the private sector but are still down 7.6% over the last year.
- Regionally, job increases were led by Southern California. Los Angeles (MD) saw the biggest increase, where payrolls grew by 154,900 during the month. Orange County (68,200), San Diego (51,600), and the Inland Empire (43,800) also added a significant number of jobs during the month. Over the past year, Orange County (-11.7%) experienced the steepest job losses in the region, measured by percentage decrease, followed by Ventura (-10.3%), Los Angeles (MD) (-10.3%), San Diego (-10.3%), and the Inland Empire (-9.7%).
- In the San Francisco Bay Area, San Francisco (MD) and San Jose experienced the largest increases, where payrolls each expanded by 37,200 positions in June. The East Bay (27,300), Santa Rosa (8,500), San Rafael (MD) (5,500), Napa (3,800), and Vallejo (2,800) also saw payrolls expand during the month. Over the past year, Vallejo (-12.6%) had the steepest declines in the region, followed by the East Bay (-12.1%), San Francisco (MD) (-10.9%), and San Rafael (MD) (-10.5%).
- In the Central Valley, Sacramento experienced the largest monthly increase as payrolls expanded by 23,400 positions. Payrolls in Fresno (10,600), Bakersfield (9,900), Modesto (7,600), Stockton (7,500), and Visalia (5,300) increased as well. Over the last year, Yuba (-11.4%) had the steepest declines followed by Modesto (-10.4%), Sacramento (-9.3%), Madera (-9.2%), Bakersfield (-9.0%), Chico, (-8.5%), and Redding (-8.5%).
- On California’s Central Coast, Santa Barbara added the largest number of jobs, with payrolls increasing by 7,100 during the month. Payrolls in Salinas (6,600), San Luis Obispo (2,500), and Santa Cruz (2,400) also increased during the month. From a year-over-year perspective, San Luis Obispo (-15.9%) shed positions at the fastest rate, followed by Santa Cruz (-14.8%), Salinas (-13.5%), and Santa Barbara (-11.5%).
By Beacon Economics, an independent economic research and consulting firm based in Los Angeles. The UCR School of Business Center for Economic Forecasting and Development is the first world class university forecasting center in the Inland Empire. This analysis was authored by Taner Osman and Brian Vanderplas. Learn more at www.beaconecon.com and www.ucreconomicforecast.org.