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State's Job Growth Hits Unexpected Cold Spell

Labor: Unemployment rate inches up at year's end after a strong November. Analysts say it could signal a slower economy.


In a sobering finale to an otherwise robust year of job growth, California employers added a measly 4,400 new jobs in December and the jobless rate edged up at the end of the year, government officials said Friday.

December's surprisingly skimpy job gains were in sharp contrast to the whopping 378,000 nonfarm jobs created nationwide last month. Unemployment in the state inched up to 5.9%, from a revised 5.8% in November, although the U.S. unemployment rate dipped last month by the same magnitude to 4.3%.

Friday's California report, however, showed that job growth in November was much stronger than previously estimated, and that statistical adjustment by the state's Employment Development Department probably exaggerated the weakness in December. The unusual cold spell in December also may have held back construction payrolls in California, even as unseasonably warm weather in the Midwest and East inflated employment rolls there last month.

State monthly payroll numbers, which are adjusted for seasonal variations, are based on a relatively small sample of employers and can be volatile, depending on the survey period and other statistical quirks. Last July, California employers added just 3,700 jobs, triggering concerns, but that was followed by a burst of hiring in the ensuing months.

There is less likelihood of that happening this time, however. With recessions in Asia buffeting high-tech manufacturers and the unsettling conditions in Latin America, analysts said the latest report for California may portend the economic slowdown widely expected in the months ahead. Asia's troubles already have weakened the state's exports and led to a sharp deceleration in the San Jose area.

Southern California's more diversified economy has held up better, and that trend continued in December. Los Angeles County, where 29% of the state's payroll workers are employed, added more than 101,000 jobs for all of last year--about a quarter of the state's new jobs. For the county, that was a growth rate of 2.6%, smaller than the statewide average but still solid.

In December, Los Angeles County's nonfarm payrolls totaled 4.05 million--the highest this year and more than 300,000 jobs higher than December 1993, the year-end low point this decade. Still, as of last month the county remained about 140,000 jobs shy of the peak year-end employment in December 1989. The county's unemployment rate last month stood at 6.7%, up slightly from December 1997.

Statewide, job growth for all of last year exceeded many people's expectations. Assuming that December's figures hold up, nonfarm jobs last year grew by more than 418,500 from 1997, based on monthly averages. That was a growth rate of 3.2%, just a bit lower than the 3.3% increase for all of 1997, when the state churned out 424,000 jobs. By comparison, the nationwide job growth rate for all of last year was reported at 2.3%.

The industries that propelled California's expansion last year were construction, which added nearly 51,000 jobs, a gain of more than 9%; and business services--a group that includes employment agencies and computer software and services, which overall boosted payrolls by more than 81,000, or 8%.

California's employment in wholesale and retail trade last year advanced by 2.4%, or about 72,000 new jobs; and the number of employees in finance, insurance and real estate rose by 3.4%, or 25,300.

Manufacturing employment, meanwhile, wound up with a growth of 1.5%, or 28,300 jobs, after expanding at more than double that pace in the previous year. That was still better than the nation, which shed a total of 269,000 factory jobs last year.

The slowdown in manufacturing and some other industries is expected to cut the state's overall job growth this year to a more modest rate of about 2%.

Sung Won Sohn, an economist for Wells Fargo Bank, said Friday that California's small job growth in December was probably a reflection of the delayed effects from the Asian crisis on manufacturing, which in turn is now starting to weaken the service industries.

"Asia has not disappeared and it is working its way through California's economy," Sohn said. He pointed, however, to the divergent picture between Northern and Southern California that was evident in the state's report Friday.

In December, job growth in Santa Clara County, home to Silicon Valley, fell to an anemic level of less than 1% on an annual basis, even though the unemployment rate there fell to 3% last month. Nonfarm employment in San Francisco County was up less than 2% in December.

By comparison, Los Angeles County's payrolls were up 2.3% in December compared with a year ago, and the surrounding areas did considerably better. Jobs in Orange County increased by 3.4%, and the year-over-year growth rate was a stunning 5.2% for the Inland Empire and a strong 3.8% for Ventura County.

The unemployment rates for the surrounding counties of Los Angeles all plunged last month, although these figures are not adjusted for Christmas hiring and other seasonal factors. Orange County's jobless rate dropped to 2.4% from a revised 2.7% in November; the Inland Empire's declined to 4.8%, from 5.5%; and Ventura County's fell to 5.2% from 5.9%.


Jobless Rate Up

California unemployment rate, seasonally adjusted:

December 1998: 5.9%

Source: Employment Development Department

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