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State Sees Solid Gain in Jobs

September's rise, though less than August's, eases fears about the housing slowdown's effect.

October 21, 2006|Bill Sing | Times Staff Writer

California employers added a net 17,300 payroll jobs in September, the state said Friday, another sign that the Golden State continues to weather the housing market's slowdown.

Although the increase was off from August's robust gain of 36,800 jobs, it was seen as enough to keep the state on a path toward a "soft landing" of slow but steady growth without recession. Payrolls expanded in nearly all sectors.

The unemployment rate fell to 4.8% from 4.9% in August, the state Employment Development Department said.

"It was a solid report, not as spectacular as last month, but still good," said Howard Roth, chief economist for the state Department of Finance.

Like the national economy, California's job growth this decade has lagged behind the strong increases of the booming 1990s. Employers, wary of high benefit costs and rising energy prices, have hired sparingly. Instead, they have relied on technology and other tools to squeeze as much as possible out of their workforces.

Now the job picture is being threatened by a slump in new-home building, as builders have been forced to cut hiring after a five-year boom. Construction was the state's best job creator last year, adding an average of 5,000 jobs each month, Roth said. That margin accounts for nearly the entire gap between last year's average monthly job gains of 24,000 and September's job advance, Roth said. This year's monthly average has been a sluggish 13,800, he said.

Fortunately, job creation in other sectors appeared to be holding up well. Ten of the 11 sectors tracked by the Employment Development Department posted increases in September, led by education and health services, up by 4,600 jobs.

Manufacturing added 4,000 jobs, thanks to strong global demand for the state's technology and aerospace products, said Steve Cochrane, an economist at Moody's Economy.com. A resurgence in tourism, led by foreign visitors encouraged by strong economies in their homelands and a weak dollar, contributed to a gain of 3,900 jobs in leisure and hospitality, Cochrane said. Employment in professional and business services grew by 2,500 positions.

Even the construction industry managed to add jobs last month, with a gain of 300. Strength in commercial real estate, amid growing demand for office and industrial space, is offsetting weakness in residential construction, economists say.

The only category posting a decline was trade, transportation and utilities, which includes the retailing sector. Employment in that grouping fell by 900 jobs, a drop blamed in part on continuing consolidation among department stores and supermarkets, Roth said.

"We're having a slowdown in housing construction but the rest of the economy is doing all right," Roth said.

A continuation of that trend is seen as essential to keep the housing slowdown from turning into a more severe slump like that seen in the early 1990s. Then, a recession caused in part by massive job losses in Southern California's aerospace industry led to home-price declines. Price gains were weak the rest of the decade.

As long as the economy avoids massive layoffs, few homeowners will be forced to sell, limiting the market's downside and reducing the odds of a recession, experts say. The last recession, in 2001, was caused primarily by a slowdown in business investment as the housing boom was just beginning to gather steam.

"Housing is about the only real weakness in the California economy right now, and it would take a serious downturn in house prices to cause a recession," economist Cochrane said.

The drop in joblessness is also a sign of the economy's resilience. The unemployment rate is based on a survey of households, which showed a sharp increase of 159,000 jobs in September. That survey captures some of the self-employment and "underground" jobs not tracked in the payroll survey. But the household survey uses a relatively small sample size and is seen as more volatile and less reliable.

Orange County continued to win honors for the Southland's lowest jobless rate, at 3.4%, followed by San Diego County at 3.9%. Unemployment was at 4.4% in Ventura and San Bernardino counties, 5% in Riverside and 4.8% in L.A. County.

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bill.sing@latimes.com

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