California’s labor market weakened in late summer, the unemployment rate rose again and the state added few new jobs, according to new data released Friday.
The U.S. Bureau of Labor Statistics said the statewide unemployment rate rose one notch to 5.3% in August (from 5.2% in July), with Illinois having the second highest at 5.5%. The number of jobless in the country, as previously reported, fell to 4.2% last month.
While California saw significant job gains last month in health care, entertainment and hospitality, employment declined in other key parts of the state’s economy, including the film, technology and manufacturing industries.
And significantly, California’s public sector, a reliable source of job growth, lost jobs last month for the first time in more than a year. The drag is due to significant losses in state government payrolls, which analysts attribute to Sacramento’s budget problems.
“This month’s drop largely reflects the hiring freeze the governor first announced in the spring,” said Michael Bernick, a former director of the state Employment Development Department who has tracked trends in California government since the late 1970s. “There have been no layoffs,” he said, “but vacancies typically go unfilled as employees retire or leave state government.”
Over the past three decades, Sacramento has been adding jobs like clockwork, with its payroll growing from about 400,000 in 1995 to 580,000 in July before falling by 17,100 last month.
“Whether or not this reduction reflects any long-term change in the growth trajectory of state government will depend on the duration of the freeze, state budget policies and political decisions,” Bernick said.
California employers, by and large, have joined the network. 6800 new jobs in August. That was well below the state’s monthly average of 17,750 this year and its share of the 142,000-strong national population increase in August.
Nationally, hiring is slowing and job opportunities are shrinking. These were the main factors behind the Federal Reserve Bank’s decision to cut interest rates for the first time since 2020 and the series of rate hikes to reverse the rise in inflation following COVID-19.
The unusually large half-point rate cut is expected to be the first in a series of cuts aimed at keeping the economy and job market from stalling.
The number of U.S. jobless claims rose by 775,000 over the past year to more than 7.1 million. More than 1 million workers were unemployed in California as of August. Beacon Economics, a private consulting firm, said many of them are younger workers.
California’s relatively high and rising unemployment rate may also reflect increased immigration, which has increased the labor pool.
Changes in the federal interest rate may take months to trickle down to consumers and the broader economy, but they could boost business confidence more quickly, which could help stabilize employment in the short term. Reflecting the growing optimism, investors have pushed up stock prices this week.
Low interest rates should boost California’s housing market, which has been held back by relatively high mortgage rates and skyrocketing home prices. Construction employment was flat in August, as was employment in the real estate sector and, more broadly, in financial services.
The state’s film industry was weak. In August, film employment in Los Angeles County fell by less than 100,000.
Los Angeles County’s overall unemployment rate rose to 5.6% in August from 5.5% last month and 5.1% a year ago.
Regionally, job growth last month was led by the Central Valley, according to Beacon Economics. In Southern California, the Inland Empire and San Diego saw the biggest increases.
