California Unemployment Rate Remains High Amid Reopening

Customers leave Urban Outfitters with their purchases as they shop at Pacific City shopping mall on May 26, 2020, in Huntington Beach, Calif. (AP Photo/Ashley Landis)

SACRAMENTO, Calif. (CN) — The soft reopening of the largest economy in the United States couldn’t stem California’s abysmal unemployment trend as officials on Friday pegged the state’s jobless rate above 16%.

Jeffrey Clemens, economics professor at University of California, San Diego, says the snapshot suggests a significant recovery is far from underway in the Golden State and nationwide.

“The situation is bleak,” Clemens said. “California and the national labor market remain severely depressed relative to what they were before the pandemic.”

According to the California Employment Development Department, employers added over 140,000 jobs in May but the gains hardly dented April’s record-high 16.4% unemployment figure. While nine of 11 sectors reported jobs growth, statewide unemployment was 16.3%, greatly outpacing the 12.3% high mark set during the Great Recession.

The pandemic-induced stoppage of California’s $3 trillion economy put millions of residents suddenly out of work and sent jobless claims soaring. In a matter of weeks, the state zapped its unemployment insurance fund and has turned to the federal government for relief as it did during the last recession.

In May, California had 1.8 million more people receiving unemployment benefits compared to the same month in 2019. Since March, over 5.5 million Californians have filed claims for unemployment insurance and the state says it’s paid out over $30 billion due to the shutdown.

In total, California has over 3 million unemployed, nearly 300% higher than last February (759,000).

California’s unemployment rate has stagnated compared to the nationwide total, which dropped to 13.3% last month. As for year-over-year change, the state’s unemployment total is 12.2% higher than May 2019.

The U.S. Bureau of Labor Statistics released its state-by-state May jobs report Friday, finding that unemployment rates were lower in 38 states along with the District of Columbia.

Nevada, Hawaii and Michigan registered rates above 20% while Florida (14.5%) and Massachusetts (16.3%) set new record highs since the feds’ state unemployment data series began in 1976. Two dozen states had unemployment figures below the nationwide rate and 12 had higher rates; 14 registered rates close to the nationwide 13.3% total.

Meanwhile, California saw the largest year-over-year May decline in jobs with 2.2 million, followed by New York with 1.7 million and Texas 900,000. Nonfarm employment increased in 46 states but remains down in all 50 states compared to May 2019.

Though California counties have begun reopening in various forms, Clemens says rampant uncertainty for both workers and employers will likely prevent a quick economic turnaround.

Clemens outlined the difficulty businesses like restaurants and bars are having in attracting workers who in many cases are receiving more in unemployment, due to the extended federal assistance, than they were at their old job. Add workplace safety concerns and the fact many businesses aren’t in a position to hand out raises, and you have a potent mixture of employment barriers.

“In order to attract a worker out of collecting a benefit that exceeds their past wages, you would have to pay even more than that. So those jobs are on some level just not going to materialize because neither the worker nor the employer can figure out a way for that to make sense,” Clemens said.

The federal assistance is set to expire in July but Clemens added there’s no guarantee of jobs in sectors like the hospitality industry that are scrambling to change operating procedures.

He also raised the likelihood of workers demanding more pay due to higher health risks associated with returning during a pandemic.

“Revenue per-hour is down because you can only seat half as many people in your restaurant because of health regulations, so it’s not like employers are exactly flush with cash,” Clemons said.

Construction, leisure and hospitality and education sectors added the most jobs in May while the total number of agricultural workers dropped 18,000.

California’s unemployment rate comes from a federal survey of 5,100 households taken from the middle of May, and the next update is due to be released on July 17. Total nonfarm payroll jobs (15.1 million) come from a federal survey of 80,000 California businesses.

%d bloggers like this: