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California adds 50,000 jobs, unemployment dips to 6.5%

California employers contributed a quarter of the nation's jobs in December but economists warn January's figures could take an omicron-induced hit.

SACRAMENTO, Calif. (CN) — Accounting for a quarter of all new hirings in the nation in December, California’s jobless rate ticked down to 6.5% as employers added over 50,000 jobs.

The strong growth came in an otherwise disappointing month in which the U.S. economy added less than 200,000 jobs. Nonetheless, California’s unemployment rate remains stubbornly above the national average of 3.9% even though it added nearly 1 million total nonfarm jobs in 2021 and tallied a record 6% calendar year increase.

After cutting more jobs in the outset of the pandemic than any other state, employers in the Golden State have regained 72% of the 2.7 million jobs lost in March and April 2020.

Governor Gavin Newsom, who is up for reelection in November, applauded the monthly jobs report and noted California added the most jobs in the nation in 2021.  

“California continues to create an outsized share of the nation’s new jobs, with 25% of the entire country’s job creation happening right here — part of the record 1 million new jobs that our state created throughout last year’s economic recovery,” the Democrat said in a statement. “As we go forward this year, we’ll continue taking action to get more folks back to work and support our businesses hit hardest by the pandemic.”

Economists agreed California clearly made progress last month but reiterated the snapshot was taken in mid-December, weeks before the omicron variant surge crested in the nation’s most populous state.   

Sung Won Sohn, professor of finance and economics at Loyola Marymount University, says the next update is unlikely to be as promising.

“The full effect of omicron was not felt during the survey week,” Sohn said. “Since then, airlines canceled flights, businesses extended at-home work and schools went online, forcing parents to stay home. Hopefully, omicron’s bark might be worse than the bite.”

Perhaps a sign of what’s to come in the next jobs update, new unemployment claims spiked 10% in the week of Jan. 8 in California while claims in other states dropped nearly 25%.

Jeffrey Clemens, associate professor of economics at the University of California, San Diego, says although California had a stronger month than the rest of the country, its labor market remains in a “much larger hole” overall. To reach prepandemic levels, California still needs to add over 750,000 jobs or a shortfall of 4.4%.

Nationwide, job growth averaged 537,000 per month in 2021 for a record total of 6.4 million new jobs. Overall, the economy is still down 3.6 million jobs compared with February 2020, when the unemployment rate stood at a 50-year low of 3.5%.

While California’s labor force increased by 30,000 in December, Sohn said there is still great demand for new hires. But Sohn said a variety of factors are keeping people out of the workforce and more specifically the leisure and hospitality sector, including school shortages, Covid-19 concerns and the government's “spraying of money” during throughout the pandemic.

“Workers are in no hurry to return to work,” Sohn said, adding it could take years for the industry to return to prepandemic employment levels.

More than 1.2 million Californians were unemployed in December, down from nearly 1.75 million in December 2020.

A full state-by-state employment rundown from the U.S. Bureau of Labor Statistics comes out next week. Friday’s unemployment estimate and jobs numbers come from a pair of surveys of California households and businesses conducted monthly by the federal government.  

During the pandemic the state has issued $180 billion in unemployment benefits, including at least $20 billion to fraudsters. Most states have utilized federal pandemic funds to pay off their unemployment insurance debt, but California is one of nine with outstanding federal loans.

Whether Newsom and lawmakers will utilize the state’s massive budget surplus to cover the unemployment loans in the next state budget or force the balance on employers remains to be seen. According to federal data, California owes $19.7 billion on its unemployment loans, followed by New York with $9.4 billion and Illinois at $4.5 billion.

Across major counties, unemployment remained high in Fresno (7%), Los Angeles (6.2%), Sacramento (4.8%), San Diego (4%), Orange (3.7%) and San Francisco (3%).

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