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California Added Over 100,000 Jobs in May, but Labor Shortages Threaten Recovery

Experts say pandemic-inspired extra unemployment benefits are holding the state back.

SACRAMENTO, Calif. (CN) --- California employers added nearly 105,000 new jobs in May, yet weakened pandemic restrictions that allowed much of the hospitality and entertainment industries to fully reopen didn’t make a dent in the state’s unemployment rate.

State officials on Friday pegged the state’s rate at 7.9%, a negligible improvement from April’s 8%. Even after adding over 100,000 jobs for the fourth consecutive month, California’s jobless rate is nearly 2.5 points above the national average.

The update was taken last month as restaurants, bars and entertainment venues began to spring back to life after the wholesale closures ordered by Governor Gavin Newsom and local officials more than a year ago were lifted. California has added more jobs --- 495,000 --- than any other state over the last four months, but its unemployment rate continues to hover around 8%.

In a statement, Newsom evaded the stubborn unemployment rate and focused on the six-figure job gains.

“California continues to lead the nation’s economic recovery,” the Democratic governor, who is currently fending off a recall bid, said. “Our health-centric approach has saved lives, resulting in one of the lowest case rates and the most vaccinations in the country --- now we’re leading the nation in health and economic outcomes.”

Continuing a months-long trend, the state’s hard-hit leisure and hospitality industry led the way in May with 62,300 new jobs. The industry has generated over 50,000 new jobs in each of the last four months.

After a dramatic wave of layoffs in the early months of the pandemic, the industry has regained 468,000 jobs. Overall, the industry has contributed one-third of the total jobs added in the state since May 2020.

Jeffrey Clemens, economics professor at University of California, San Diego, said the May update offers a “very glass-half-empty/glass-half-full picture.” The 104,500 new jobs certainly shows positive growth, but Clemens noted the hospitality industry is still in a major hole.

“Even with April and May's strong growth, California's leisure and hospitality employment remains 25% lower than its level from February 2020,” Clemens said.

Newsom touted the fact California’s unemployment rate is finally less than half of its peak pandemic rate. But the state’s recovery is still lagging, said Loyola Marymount University economist Sung Won Sohn.

While the national economy has recovered 66% of jobs lost during the pandemic, California has filled just 52%. Sohn points to persistent labor shortages caused by extra unemployment benefits as the main factor holding back California’s recovery.

“Some workers can earn more watching TV from a couch than working,” Sohn said in an email.

Small businesses are bearing the brunt of the labor shortage, with restaurants struggling to find cooks and hotels unable to secure enough cleaning staff. Suddenly teenagers with no job experience are being offered signing bonuses and “wages unthinkable before the pandemic," Sohn said.

Sohn’s point is highlighted by last week’s wave of new unemployment claims, as the state saw a 30% spike in filings compared to the week before. He says the workforce likely won’t be able to match demand for several months.

“Until the bonus unemployment benefits expire in September and the schools reopen this fall, labor force is not likely to grow much,” he added.

To slow the pace of those seeking unemployment assistance, Newsom announced this week the state will soon end benefits for people not looking to rejoin the workforce.

Since March 2020, the state has waived its so called “work-search” rule due to the enormous number of business closures and allowed even people not actively submitting job applications to receive unemployment benefits. But beginning July 11, the requirement will be reinstated.

“California offers many resources to help people to find safe and suitable careers and training opportunities that keep the economy moving,” said Employment Development Department director Director Rita Saenz. “We want to make sure those on unemployment have enough lead time to start searching for work so they can remain eligible for benefits as they seek their next career opportunity.”

Since March 2020, the state has dished out over $151 billion in benefits, including an estimated $31 billion to fraudsters.

Statewide, unemployment is over 10% in five counties, paced by Los Angeles at 10.1%. Rates in other major counties include San Diego (6.4%), San Francisco (5.1%), Orange (5.9%), Sacramento (6.8%) and Fresno (8.8%).

Follow Nick Cahill on Twitter

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