California’s unemployment rate remained unchanged in June at 4.7 percent according to the state Employment Development Department, the same rate recorded at the end of 2000 and down 0.8 percent from last June. California’s unemployment rate is only 0.3 percent higher than the national rate, far from the 3 percent difference seen in 2011. The continued decrease in the state’s unemployment rate has mostly resulted from a higher slowdown in labor-force growth than in employment growth. The state’s employment growth rate has been slower in 2017, but it is on pace with the national growth rate of 1.6 percent.
California added a total of 159,900 jobs so far in 2017 compared with the 65,400 positions added during the same period last year. While it appears that job openings are plentiful, employers are having a difficult time finding skilled workers, especially for lower-wage positions where employees face increasingly forbidding housing costs.
A recent Yahoo Finance article addresses the issue employers are facing in trying to fill vacancies: “According to a chart from Deutsche Bank economist Torsten Sløk, it now takes 31 days to fill an open job in America, up from 23 days in 2006 and about 15 days in 2009 … It’s never taken this long to find a worker in America … ” The article quotes another report from the National Federation of Independent Business’s small-business optimism report, which showed that “85% of those hiring or trying to hire [reported] few or no qualified applicants for their open positions.” In May, the NFIB’s report found that 33 percent of all small-business owners couldn’t fill a job in the previous month, the highest reading since November 2000. In April, there were 6.04 million open jobs in the U.S., the most on record.
Nevertheless, while the state lost 1,400 jobs in June, the decline was driven by the government sector, which shed 8,800 positions, driven by a larger-than-usual summer drop for public schools. Public schools generally shed about 20,200 jobs from May to June between 2011 and 2015, compared with 31,400 lost in 2016 and 32,000 lost in 2017 between the two months. Next month, public education should see the largest annual jobs decrease based on historical trends. Still, year-over-year government employment is in positive territory.
The industries that added jobs in June included administrative support, construction and transportation, and warehouse and utilities. The information and manufacturing sectors lost jobs, as did the professional, scientific, and technical services; wholesale trade; and retail trade industries.
Over the last year, 8 of California’s 11 industry sectors added a total of 274,000 jobs, with the largest gains in the educational and health services, construction, and leisure and hospitality sectors. Other sectors that added jobs over the year were government; trade, transportation and utilities; professional and business services; other services; and financial activities.
Industries that shed jobs year over year totaled 12,600 job losses and include manufacturing, information, and mining and logging. The loss in the information sector was driven by a large drop in the motion-picture and sound-recording businesses, following a surge in those industries seen in the year prior. Thus, it could be simply an adjustment and not a general declining trend.
Employers in California’s metropolitan areas created 19,100 jobs in June, with the Bay Area taking the lead. San Francisco added 4,900 jobs, San Jose added 2,600 jobs, and the East Bay added 1,900 jobs. In Southern California, Orange County added 3,600 positions, while Los Angeles added 2,900.
Overall, the June jobs report is encouraging but highlights some of state’s pain points, including the disproportional growth among jobs paying below $60,000, which make it increasingly difficult for such employees to find affordable housing close to their jobs. Hence, some of the fastest-growing areas of the state include more affordable regions such as Sacramento and Merced, the latter of which had the largest month-to-month increase in jobs in percentage terms, at 1.2 percent.
Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.
by Selma Hepp, Chief Economist, Pacific Union