California Job Tracker-August

By Dr. Lynn Reaser, Ph.D., CBE

CALIFORNIA BOUNCES BACK

After June’s initial employment numbers raised concerns that California’s economy might be slowing, revisions and an upsurge in hiring during July indicate that it might have been a false alarm. Nonfarm employers in California added 46,700 workers to their payrolls in July, the most since January. In addition, June’s originally reported anemic job gain of just 800 was revised upward to 21,500.

California is again leading the nation, with year-over-year job growth of 2.0% versus a 1.6% rise for the country as a whole. The state’s unemployment rate held at a record low of 4.2% in July despite an increase in the number of individuals entering the workforce.

California job gains between June and July took place in manufacturing, transportation, trade, business and professional services, education, health care, and tourism. Small decreases occurred in construction and finance, while government employment was essentially flat.

The latest employment news indicates that California is weathering tensions on global growth and trade with solid performance.

JOB TRACKER 2.0

At the beginning of this year we introduced Job Tracker 2.0, which has three major components

Ø The California Heat Map shows which areas are gaining jobs (green), reporting no change (yellow), or losing jobs (red). It is intended to present a snapshot of the current health of California’s economy on the basis of its metropolitan statistical areas (MSAs).

Ø The Regional Job Growth Tracker depicts the job performance over time of California’s major regions (Bay Area, Southern California, Central Valley, and the Central Coast). Its purpose is to call attention to differences that may be developing across California and to show which areas might be accelerating or decelerating.

Ø The Jobs Dispersion Index shows the net percentage of MSAs in any month that are experiencing increases as opposed to declines in employment. A number of 100 would indicate that all 29 MSAs are recording growth, whereas a 0 reading would reflect job losses in all of California’s regions. A Jobs Dispersion Index score of 50 would indicate that equal numbers of MSAs are reporting increases and decreases in jobs or all are unchanged. The Jobs Dispersion Index is designed to illustrate swings that might be occurring in large numbers of individual regions across the state.

It should be noted that all three elements of Job Tracker 2.0 are based on the average number of jobs in the last three months versus the average for the prior three months. This methodology is intended to remove some of the month-to-month volatility in order to understand the progress of underlying trends.

July Readings

July’s Heat Map (Figure 1) shows that 20 of California’s 29 MSAs registered job gains during the month, while one declined (Yuba City) and eight were flat. The largest areas showing gains were Los Angeles, the Inland Empire (Riverside and San Bernardino Counties), San Diego, San Francisco, and San Jose. Orange County, Sacramento, and Oakland represented the largest regions registering essentially no change in their average job levels during the last three months versus the prior three months.

The Regional Growth Tracker (Figure 2) shows that Southern California and the Central Valley accelerated in July in terms of job growth. In contrast, the Bay Area and the Central Coast decelerated. Significantly, the state as a whole showed an acceleration in its job growth with the latest numbers. The Bay Area continues to lead the state’s other regions in terms of job growth.

The Jobs Dispersion Index (Figure 3) edged lower to 70.7 in July from June’s 77.6 reading. While not as strong as some of the other months this year, July’s figure still shows that the preponderance of California regions are posting job gains as opposed to losses.

OUTLOOK

The Job Tracker data shows that California is retaining its resilience. The demand for technology, rising incomes, and tax cuts continue to power the economy forward. Higher interest rates along with the rising cost of labor and materials may be starting to hurt the construction and real estate sectors. While trade tensions remain, significantly negative impacts on the overall economy are not yet evident.

Lynn Reaser is chair of the treasurer’s Council of Economic Advisors and chief economist at the Fermanian Business and Economic Institute for Point Loma Nazarene University. The opinions in this article are presented in the spirit of spurring discussion and reflect those of the author and not necessarily the treasurer, his office or the State of California. Job data used in this article is compiled by the Fermanian Business and Economic Institute for Point Loma and is not meant to be used as an official State of California source or replace official information released by the State of California and/or State Department of Finance.