By Dr. Lynn Reaser, Ph.D., CBE
CALIFORNIA’S ECONOMY REMAINS STRONG
California’s jobs market remained healthy in September, with another gain in employment and drop in the unemployment rate to another record low.
The state’s nonfarm employers added about 13,000 (13,200) workers to their payrolls in September. While the smallest gain since May, it followed two exceptionally large gains. For the third quarter as a whole, employers created more than 90,000 new jobs compared with an average of about 55,000 jobs added during each of the first two quarters of the year.
California’s jobless rate fell to 4.1% in September from 4.2% in August. This was the lowest level since records first started to be kept in 1976. The decline in the unemployment rate fell despite a sizable rise in the labor force. Even more people found jobs.
California outpaced the nation in terms of year-over-year job growth for the 79th consecutive month or since early 2012.
September’s moderate gain in payroll jobs occurred as gains in business and professional services, tourism, and government countered small declines in construction, manufacturing, and education and health care. Information services, encompassing such industries as publishing and motion pictures, posted a more sizable loss. Payrolls in transportation, trade, and utilities, along with financial services, were flat.
September’s jobs report indicates that California’s economy remains healthy. More individuals may finally be starting to be confident enough to enter or re-enter the labor market and search for work. Companies are struggling to fill open positions with qualified workers. As the jobless rate continues to fall, more employees in enterprises through the state should start to see larger increases in their paychecks.
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.
September’s readings, because they are based on the average of the last three months, give a full picture of how the state’s job market performed in the third quarter versus the second.
The September Heat Map (Figure 1) shows that 17, or about three-fifths, of California’s 29 MSAs registered job gains during the third quarter. Ten exhibited essentially no change in their job levels from the prior quarter, while only two (Santa Maria-Santa Barbara and Hanford-Corcoran) saw declines. Gains were widespread in the Central Valley. Much of the Bay Area and Southern California also recorded increases, although such metropolitan areas as Oakland, Orange County, and San Diego were flat.
The Regional Growth Tracker (Figure 2) shows that three of California’s major regions (Bay Area, Central Valley, and Southern California) accelerated in the third quarter versus the prior three months. The speed-up in job growth was particularly pronounced in the Central Valley. Only the Central Coast, including Santa Barbara, San Luis Obispo, Salinas, and Santa Cruz, saw a reduction in job growth during the latest quarter.
The Jobs Dispersion Index (Figure 3) moved lower for a third consecutive month, but held in positive territory. At 62.1, it was back to the level last seen in April, but still indicated that more of California’s major metropolitan areas were posting job gains as opposed to losses.
September’s jobs report shows that California continues to possess significant momentum. Increases in defense spending along with tax cuts will provide significant support. It does face several headwinds. A stronger dollar, along with retaliatory tariffs by China, will constrain exports. Rising interest rates are already causing home sales to slow. If tensions with China continue to grow, trade and investment flows could be sharply curtailed. Trade issues with Europe also need to be resolved. California’s expansion is by no means over, but the path forward could be more treacherous.
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.