By Dr. Lynn Reaser, Ph.D., CBE
California’s job market was flat in June based on the numbers released in July. The unemployment rate held steady at 4.7%, the same level as in May, and close to the national average of 4.4%.
Nonfarm employers essentially held their payrolls unchanged between May and June. A tiny 1,400 job reduction on a base of 1.7 million workers represented a decrease of less than 0.1%. Job gains in construction, finance, and business and professional services countered losses in manufacturing and government. These numbers are preliminary.
May’s job gain was revised upward from 18,000 to 25,000.
Compared with a year ago, California nonfarm job growth had outpaced the nation for 61 consecutive months through March. The state slipped below the nation in April and May but has now pulled even with the rest of the country. Both California and the U.S. posted year-over-year job growth of 1.6% in June.
Recent trends do suggest caution. Looking at the quarterly gains in nonfarm payrolls, increases had held in the range of 60,000 to 110,000 for five consecutive quarters through the first quarter of 2017. In sharp contrast, only 6,000 jobs were created in the second quarter. (See Figure 1.)
Geographic Recovery Remains Incomplete
California, as of midyear, was still missing two areas from a full recovery from the “Great Recession” of 2007-09. Redding and Hanford-Corcoran, reflecting the problems facing parts of rural California, had still not recouped all of the jobs losses incurred during the downturn. While Redding shows promise of joining the recovery club again soon, more time is likely to be required for Hanford-Corcoran (See Figure 2.)
More Lift from the U.S. Economy
A pickup in economic activity in the rest of the country could offer more lift for California in the second half of the year. U.S. economic growth improved in the second quarter, with real gross domestic product (GDP) expanding at an annualized rate of 2.6%.
Third quarter growth should be around 3.0% with support from consumer spending, business investment, exports, and construction. California companies should benefit from strong growth abroad along with a weaker dollar. Wage gains and increases in wealth, driven by this year’s rise in home and stock prices, should boost spending by the state’s consumers.
More support from the rest of the country together with California’s internal drivers, such as technology, could help the state emerge from its spring dampness and warm up during the summer months.