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California

Sharp Drop in State Job Gains

Report says just 8,700 positions were added. Some analysts say the real picture is stronger.

December 11, 2004|Bill Sing | Times Staff Writer

California employers added a meager 8,700 net nonfarm jobs last month, the state reported Friday, providing another sign that companies are reluctant to hire aggressively even as economic growth shows staying power.

The gain was sharply lower than the revised net jump of 42,400 positions in October, the state Employment Development Department reported. The increase also was lower than what the Golden State should have generated, based on its share of the national job market, economists said.

The unemployment rate declined to 5.7%, down from 5.8% in October and the lowest rate since September 2001.

Analysts said the state's economy and job picture -- while not going gangbusters -- was stronger than the report indicated.

"Today's number wasn't a barnburner, but as a whole, it's a lot better than a year ago," said Howard Roth, chief economist for the California Department of Finance as well as for Gov. Arnold Schwarzenegger. The average for the last two months was 25,550 jobs, he noted, while personal income and taxable sales are growing about twice as fast as they were a year ago.

"That bodes well for the state's economy" and its budget challenges, Roth said.

Nonetheless, California employers still are cautious about hiring, analysts said.

Employee benefit costs, including health insurance, remain formidable. And employers still aren't seeing expected savings in workers' compensation insurance premiums.

Costs for energy, steel and other commodities are up. Many employers -- facing intense competition -- simply can't pass along higher costs to customers.

"Many companies are suffering from lack of pricing power," said Keitaro Matsuda, senior economist at Union Bank of California in San Francisco. As costs rise, profit gets squeezed, so employers "might play it safe or rely on temp workers," he said.

Employers also are concerned about the possibility of slower consumer spending, particularly if gasoline prices soar again or if rising interest rates throttle the strong real estate market.

But Matsuda and other analysts said the California job report understated job growth here.

California, they say, is a hotbed for start-up companies and for people choosing self-employment or independent contracting over working for big corporations. The state also has a huge informal economy of housekeepers, gardeners, illegal workers and others getting paid in cash and not on anyone's official payroll.

Those workers aren't counted in the EDD's official job number, which is based on a survey of company payrolls.

The alternative "household" survey, conducted with people at home, captures those workers -- and shows a much better job picture. But that poll's sample size is too small to be reliable, economists say.

The bottom line: No one really knows for sure how strong the job market really is.

That isn't stopping experts from producing forecasts, however. The consensus: Expect California to outperform the nation in job creation next year.

The Bay Area, the state's hiring tortoise versus Southern California's hare, is finally getting its job act together, said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange.

Manufacturing is on the rise, he said. China's economic boom should continue to boost hiring prospects for exporters and transportation firms.

On the downside, rising interest rates could dampen job growth in construction, finance, insurance and real estate, Adibi said.

The state's job growth could "be slow and steady but nothing to write home about," he predicted.

In the latest job report, six of 11 employment categories posted job gains, led by information (up 7,200) and construction (adding 5,400).

Five categories showed declines, led by professional and business services (down 5,800) and government (off 4,400).

Factor out the government job decline, and "the private sector seems to be doing its part in creating jobs," said Steve Cochrane, who follows the California economy for Economy.com in West Chester, Pa.

Several Southern California counties continued to enjoy relatively low unemployment rates, including Orange (2.9%), San Diego (3.4%), Ventura (4.7%), San Bernardino (4.8%) and Riverside (5.3%). Los Angeles County again came up near the rear, at 5.9%.

The nation posted a net job gain of 112,000 in November, with a jobless rate of 5.4%, according to figures released last week. California's job gain last month should have been 12,320, based on its 11% share of total U.S. employment.

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