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California's Jobless Rate Slides to 7% in August

Economy: Unemployment in O.C. falls to 4.2%, powered by tourism and increasing manufacturing payrolls.


California's economic recovery speeded up last month, with the state gaining an ample 34,100 jobs and the unemployment rate sinking to 7% from a revised 7.2% in July.

Orange County's jobless rate fell to 4.2% from 4.5%, despite nonfarm payrolls actually dropping by 800 between July and August. The difference, said Chapman University economist Esmael Adibi, was the tourism industry, which spurred a sizable increase in self-employed workers, such as vendors at beaches and malls.

"Another positive development is manufacturing," Adibi added. Indeed, the county's long-troubled manufacturing sector continued its slow but steady climb, adding 300 jobs last month. That brought total factory payrolls in Orange County up to 205,700--an increase of 1,300 jobs from a year earlier.

August is the fifth consecutive month in which the statewide jobless rate hit or maintained lows not seen in more than five years, meaning California is on a faster employment-growth track than the nation as a whole.

State officials also reported Friday that some of the good economic news applies to long-suffering Los Angeles County. Its unemployment rate fell in August to 7.7%--a 13-month low--from a revised 8.3% in July.

In another positive sign, recent evidence suggests that the quality of new jobs in California is improving. Instead of low-paying retailing and erratic temporary-help jobs, much of the new employment appears to be in generally higher-paying fields such as software and other business services, motion pictures and manufacturing.

"At this stage in the business cycle, firms don't want to hire temps. They're confident enough that the expansion is for real," explained Ted Gibson, economist for the State Department of Finance.

Overall, Gibson said, "we continue to have a broad-based expansion in California. All the major industrial sectors participated" in the August job gains.

In Orange County, the number of government jobs fell by 2,900 in August, but that was due to a seasonal drop in local education. In fact, analysts expect all of those jobs, plus more, to reappear next month as teachers return to schools.

On a year-to-year basis, local education employment in the county is up almost 2%, and it figures to increase in the coming months because of additional hiring to meet the state's smaller class-size goals.

As in previous months, business services and companies tied to the county's tourism industry accounted for job growth in August. Restaurants and bars, for example, added 300 jobs, while business services--which includes temporary help firms and software companies--grew by 600.

For all industries, Orange County's nonfarm payrolls in August were up 2.4% from a year earlier--just a notch below the statewide pace of growth but still impressive.

One of the few big California businesses remaining soft is home building. The market for California exports is also being tempered by the weakness of the state's trading partners in Europe, Japan and Mexico.

Until improvement comes on those fronts, "California is probably running as fast as it can," said David Hensley, regional economist with Salomon Bros. in New York.

Hensley, however, expects home building to improve next year and to nudge California's expansion along further. "Barring an unforeseen adverse development," such as a big national slowdown or a jump in long-term interest rates, "it's pretty clear sailing for California," he said.

Even the long-beleaguered aerospace industry--whose decline beginning in the late 1980s pulled California into its deep recession of the early 1990s--is making a slight recovery. It gained 300 jobs in August and is up 1,400 from February, when employment in the industry bottomed out at 163,400. That was down nearly 60% from the 1987 peak.

"The decline in aerospace is over. We're getting enough growth on the commercial side to offset the ongoing weakness in defense," Gibson said.

California's gains came in a month when the nation, as reported two weeks ago, saw its jobless rate fall to a seven-year low of 5.1%, from 5.4% in July, amid a gain of 250,000 jobs.

Along with adding proportionately more jobs than the nation as a whole, California's employment gain also outpaced its own average for the past year. Since August 1995, the state has added an average of 25,025 jobs a month.

By way of comparison, California added an average of 23,917 jobs a month last year and 24,175 jobs a month in vibrant 1989, the last year before the severe recession struck the state.

In coming months, analysts said, the state's jobless rate could be pushed up somewhat if too many new job hunters are drawn into the labor force by the improved economic news. Also, they said, part of this month's reported employment growth--an increase of 6,500 government jobs--probably stemmed from a faulty statistical adjustment that will nudge down the figures for September.

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