For the first time since the Vietnam War, unemployment in California has dropped below the 5% mark, state officials said Friday.
Job growth proceeded robustly in the face of a tightening labor market and rising wage pressures as California's nonfarm employers added 33,300 net jobs in September--even as growth for the nation stalled. And Friday's report from the Employment Development Department showed fresh evidence that California's manufacturers are emerging from the Asian crisis.
By far the big story, though, was the unexpectedly big drop in California's jobless rate, to 4.9% from 5.1% in August. The rate has not been lower since 1969, when Ronald Reagan was governor and California's economy was boosted by defense spending.
"It's even more impressive since we're achieving it without high inflation and without a war," said Michael Bernick, director of the state's employment agency.
In peacetime, the September rate is the lowest reading since at least 1946, when the government began tracking the data, said Ted Gibson, chief economist at the state's Finance Department. "That's quite a milestone," he said.
Jobless rates dropped in most areas of California. The rate for Los Angeles County edged up to 5.8%, from a revised 5.7%, a statistically insignificant increase.
The biggest drops in joblessness were in places where it is highest, such as the Central Valley, where unemployment still hovers near double digits. In fact, were it not for those farming regions, California's statewide jobless figure would probably be close to the nationwide rate, which held steady at a 29-year low of 4.2% last month.
Jobless rates in San Francisco, Santa Clara and Orange counties all dipped and remained below 3%, although those figures are not adjusted for seasonal variations, as the statewide and national figures are.
Economist Stephen Levy said California's unemployment rate, lowest in a generation, is all the more remarkable because 30 years ago, the state did not have the wave of immigrants it has today--a huge pool of new workers, many unskilled, who are trying to find jobs and acclimate to a new world.
"So to get back to that rate is quite a strong testament to California's economy," said Levy, of the Center for the Continuing Study of California Economy. That center started in 1969 and in one of its first projects sought to dispel fears that California's economy would swoon after the Vietnam War buildup ceased.
Indeed, the early 1970s saw the emergence of California's electronics manufacturing industry and Silicon Valley--seeds of the new economy that have propelled the growth in the '90s, and which appear to be gaining momentum once again.
Although slowed sharply by the Asian financial turmoil over the last year, California makers of industrial machinery and computers added 1,100 jobs in September, a sign that exports of these products also will grow in the coming months. Aerospace employment, however, contracted further by 1,000 jobs in September. Collectively, the state's manufacturing employment rose by 5,700 last month.
Government led all employers in hiring in September, adding 15,700 jobs, mainly further additions at schools to meet continued smaller classroom mandates. Services, including software makers, also added 6,200 jobs; and construction resumed its hearty growth by bringing on 5,100 new workers last month.
Overall, California contributed two-thirds of the 50,000 jobs that the federal government estimated were added nationwide last month, after accounting for the bad weather. California makes up about 11% of the U.S. labor force, but this year its share of the nation's job growth has been closer to one-fifth.
One surprisingly persistent weak spot in California, however, is retailing. Despite robust consumer spending and new stores, the industry's employment has grown by just 1% over a year ago--and it lost 200 jobs last month. Analysts say that could spell trouble as retailers near the holiday season, which is expected to be strong.
The dropping unemployment rate in California may be contributing to hiring problems for retailers and others. Employers report that it is getting increasingly hard to fill openings. Up to now, employers offering lower-paying jobs have resisted raising wages. Textile workers statewide, for example, earned an average hourly wage of $8.94 last month, up only 7 cents from the start of the year. But that may be changing soon.
"There is some wage pressure," said Scott Edwards, vice president of Pacific Fabric Finishing in Vernon, which has had eight openings for several months. "Right now, we're making up the shortfall by offering overtime to other workers at the facility."