California Unemployment Continues to Outpace US Average

The state reported 9% unemployment for January as its restaurant and tourism industry lost over 70,000 jobs as the pandemic soared to new heights of horrible.

(Courthouse News photo/Barbara Leonard)

SACRAMENTO, Calif. (CN) — Beset by major job losses in its struggling leisure and hospitality industry, California registered a 9% unemployment rate in January, outpacing the nationwide 6.2% average.  

Though the stagnant rate dropped marginally from December’s 9.3%, employers combined to cut over 69,000 jobs amid the state’s worst stretch of the pandemic. Small gains in the government arena as well as the trade, transportation and utilities sector were vastly outweighed by over 80,000 jobs lost in the hospitality, education and health industries.  

The state’s once potent hospitality and tourism industries have been hit the hardest by the pandemic, losing a staggering nearly 800,000 jobs since January 2020.

California’s weak performance aligns with what was a sluggish January labor market nationwide according to Jeffrey Clemens, economics professor at University of California, San Diego. Clemens noted the latest unemployment snapshot was recorded at the peak of California’s pandemic fight in mid-January, when the state was routinely seeing upwards of 50,000 new infections daily and had banned both indoor and outdoor dining.

But with encouraging signs emerging in the Covid fight and the fact the U.S. economy added nearly 400,000 jobs last month, Clemens says “good news is on the horizon” for the Golden State.

“This reflects the decline in new cases, the progression of the vaccination campaign and the relaxation of public health restrictions,” Clemens said of the January-to-February job gains. “These trends seem likely to continue in coming months, with the recently passed Covid relief package providing an additional boost to consumer demand.”

Friday’s unemployment number comes from two mid-January federal surveys of 80,000 California businesses and 5,100 households. California’s February update is scheduled to be released on March 26.  

Since the January surveys were taken, conditions have vastly improved: On Thursday, California recorded just 3,500 new cases while amusement parks and indoor dining will resume this weekend in Los Angeles and other major counties.   

In total, the state since January 2020 has lost 1.75 million nonfarm jobs, with the largest hits coming from the leisure and hospitality, government and professional services sectors. Meanwhile, 768,000 people have dropped out of the state’s work force.

With over 856,000 more unemployed people than a year ago, the state’s problematic Employment Development Department continues to be swamped.

According to the EDD, over $126 billion has been paid to jobless Californians since the pandemic began. California has borrowed $20 billion from the Federal Unemployment Account to stay afloat, although officials say up to $31 billion has been given to fraudsters.

While Governor Gavin Newsom has pulled back on the pandemic restrictions in recent weeks, the number of new Californians filing for unemployment each week remains unpredictable.

New jobless claims decreased last week nationwide but in California they spiked 19% compared to the previous week. The state has now processed over 12 million new claims since March 2020, or 15% of all claims nationwide.

A total of 14 counties recorded double-digit unemployment rates in Friday’s update, including Los Angeles (12.7%), Fresno (10%), Monterey (11.2%), San Joaquin (10%) and Tulare (11.3%).

California’s unemployment remains above the national average, but some experts predict the Golden State could stem the trend in the coming months.

A quarterly economic forecast by UCLA’s Anderson School of Management released this week predicts employment growth will likely start slow in California due to the severity of its pandemic orders, but will skyrocket once Newsom finally gives the green light. The forecast expects the country and state’s recovery could outpace that of the Great Recession.

The outlook pegs California’s monthly unemployment — which peaked at a record 16.4% this past May — will average around 7% in 2021 and plummet to nearly pre-pandemic levels by the end of 2023.  

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