California Job Tracker-July

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

SUMMER BEGINS SLOWLY, BUT JOBLESS RATE STAYS LOW

California’s economy began the summer with little energy in June, as the state’s nonfarm employers added only 800 jobs. This contrasted with the 7,200 jobs added in May and nearly 26,000 positions filled in April.

In contrast, despite rising trade tensions and uncertainty, the nation has added more than 200,000 jobs in each of the past two months. Although California’s year-over-year job growth was a sizable 1.6% in June, this only matched the national gain. In contrast, prior to June, California had outperformed the nation in terms of year-over-year job gains for 75 consecutive months.

Between May and June, California lost jobs in manufacturing, construction, retailing, financial services, administrative services, and tourism. Government hiring was up, as was employment in education, health care, and professional services.

California’s jobless rate remained at 4.2% for the third consecutive month in June, which is the lowest level since records began in 1976. In contrast, the U.S. rate rose from 3.8% to 4.0% as a large number of people entered or reentered the labor force.

California’s weak job performance warrants attention but does not merit undue alarm at this point. It is the worst showing in two years when California lost about 13,000 jobs in June 2016. The state then rebounded in July and remained strong through the end of the year.

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 is 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. For June, this means that the comparison is for the second quarter employment average versus the job average for the first quarter. This methodology is intended to remove some of the month-to-month volatility in order to understand the progress of underlying trends.

June Readings

June’s Heat Map (Figure 1) shows that 24 of California’s 29 MSAs registered job gains during June, while 1 declined (Yuba City) and 4 were flat. The largest areas showing gains were the Inland Empire (Riverside and San Bernardino Counties), San Diego, and all three major Bay Area metropolitan areas (San Francisco, Oakland, and San Jose). Los Angeles, Orange County, and Sacramento represented the largest regions registering essentially no change in their average job levels during the second quarter versus the first quarter of 2018.

The Regional Growth Tracker (Figure 2) shows that the Bay Area has been leading job growth, with a recent acceleration. The Central Valley has countered the recent performance of the other areas in slowing from its pace earlier in the year and showing no recent signs of improvement.

The Jobs Dispersion Index (Figure 3) advanced to 84.5 in June from May’s 65.5.This returned the Index close to its January high. The recent monthly slowdown in job growth could lead to a softening of this trend as the summer proceeds.

OUTLOOK

The Job Tracker data shows that the underlying trend in California’s jobs market was still strong overall in the second quarter. However, the recent slowing in May’s and June’s monthly job gains raises a cautionary sign.

The latest weakness could be temporary, although the impact of rising interest rates and a stronger dollar will offset some of the stimulative impact of tax cuts. Both California and the nation’s performance during the balance of the year will depend critically on the path of trade negotiations and the impact on business confidence, investment, supply chains, and consumer spending.

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.