California sees worst jobs gain in 8 months as unemployment claims soar

SACRAMENTO, Calif. (CN) — Mirroring the national trend, new hires slowed considerably in California in September as the Golden State recorded it weakest jobs gain in eight months and now claims the highest unemployment rate in the nation alongside Nevada.

California was adding jobs at a torrid pace of over 100,000 per month over most of the first three quarters of 2021 but in September employers added just 47,000. At 7.5%, California’s jobless rate remains well above the national average of 4.8%.  

After contributing nearly 50% of the nation’s new jobs in August, California created 24% last month but was outgained by both Texas at 95,000 and Florida with its 84,000 new hires.

California’s disappointing month is part of the national slowdown as the delta variant continues to hamper the U.S. economy. Each of the last two national jobs reports fell short of expectations even as unemployment rates dropped in most states.

Reacting to September’s jobs report, California Governor Gavin Newsom took the long-range view and highlighted the state’s overall pandemic recovery.

“Our economic recovery continues to make promising progress, with 812,000 new jobs this year and regaining over 63% of those jobs we lost to the pandemic,” the Democratic governor said in a statement. “As we continue averaging record job creation, our work is more important than ever to get more Californians back on the job and support those hardest hit by the pandemic.”

California has added jobs in every month this year except January but is still nearly 1 million below its pre-pandemic total.

Experts attributed the underwhelming update to the latest wave of the pandemic which again is plaguing the state’s summer tourism sector.  

Compared to 33,000 new jobs in August, the state’s leisure and hospitality industry reported 23,000 last month. Hirings at restaurants and entertainment venues slowed in many popular tourist destinations, including San Diego where the sector cut 1,500 jobs.  

“After robust gains so far this year, the state’s job machine has throttled down to a slower speed,” said Loyola Marymount University economist Sung Won Sohn.

While the state’s labor force is showing signs of growth — the participation rate is up to 61% compared to 59% at this time last year — Sohn said the outlook for California’s economy is “not bright.”

Throughout the pandemic, career restaurant workers have left the industry in droves in search of safer, higher paying jobs. Sohn says California’s mammoth quest of recovering the 2.7 million jobs lost in the beginning months of the pandemic is being impeded by labor shortages.

Meanwhile an alarming number of Californians continue to seek unemployment benefits, as last week the state contributed 31% of the country’s new claims. Initial claims dropped 19% across the rest of the U.S. but they spiked 27% in California during the week of Oct. 16.

Since March 2020, California has paid out $177 billion in unemployment benefits and has been forced to borrow nearly $20 billion from the federal government to cover the staggering costs.

With coronavirus cases continuing to drop across the state, others are more optimistic about California’s short-term outlook.

Jeffrey Clemens, an associate professor of economics at the University of California, San Diego, pointed to Texas and Florida which saw robust September job gains after the latest pandemic wave began to crest. He says California’s improving pandemic numbers could spur similar job growth for the nation’s most populous state.

California’s seven-day testing positivity rate, a key indicator of community spread, has plummeted to 2.1% and it is one of six states where the level of transmission is considered “moderate” by the Centers for Disease Control and Prevention.

According to data derived from the pair of federal surveys, California has far more unemployed than any other state at 1.4 million. Next is Texas, at 796,000 unemployed, New York’s 663,000 and Florida’s 517,000.

Other states with unemployment rates above the national average of 4.8% include Texas at 5.6%, New York’s 7.1%, Illinois at 6.8%, Pennsylvania at 6.2% and Arizona’s 5.7% rate.

Jobless rates dropped across the board last month in California’s major counties, including Los Angeles which improved from 9.7% to 8.2%. Rates in other counties include San Diego, 5.6%, San Francisco, 4.1%, Orange at 5%, Sacramento’s 6.1% and Fresno’s 7.8%.

The next monthly jobs update is scheduled for Nov. 19.

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