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State jobless rate seen rising further

Unemployment, which hit 8.2% in October, will grow in a 'deep recession,' analysts say.

November 22, 2008|Marc Lifsher and Tiffany Hsu | Lifsher and Hsu are Times staff writers.

LOS ANGELES AND SACRAMENTO — California's unemployment rate soared to a 14-year high in October, hitting 8.2%, and economists predicted that it could rise substantially over the next year and a half.

The state's economy shed 26,400 people from its payroll last month, raising the total number of lost jobs to 101,300 since October 2007, the California Employment Development Department reported Friday.

And the situation is about to get worse, predicted Ross DeVol, director of regional economics at the Santa Monica-based Milken Institute. The unemployment rate is seen reaching 9.9% in the first quarter of 2010, with the loss of 360,000 more jobs before then.

The hemorrhaging of jobs is "another indication that the state is plunging into what is likely to be a long and deep recession," said Stephen Levy, chief economist and director of the Center for the Continuing Study of the California Economy in Palo Alto.

The 0.5-percentage-point jump in the state's unemployment rate, from 7.7% in September, was even larger than the recently posted increase in the national rate, up 0.4 of a percentage point to 6.5%. The state's rate ranks third in the U.S., exceeded only by those of Michigan and Rhode Island, at 9.3% each.

Joblessness increased throughout Southern California in October. It reached 8.4% in Los Angeles County, 9.5% in the Inland Empire, 6% in Orange County and 7.2% in Ventura County.

"A financial market crisis, the loss of wealth for consumers and the growing worldwide recession are feeding on themselves as consumers and businesses grow scared and cautious," Levy said.

The upshot, he warned, is "a continuing decline in consumer spending" that is threatening to make the holiday shopping season less than jolly for retailers.

The drop in spending has flattened seasonal hiring of salespeople and pushed retail employment into negative territory along with housing, construction, finance and some types of manufacturing, said Jerry Nickelsburg, a senior economist with the UCLA Anderson Forecast who specializes in California and L.A.

"This is a consumption-driven downturn," he said.

Growing joblessness, combined with the fear of becoming unemployed, is turning normally free-spending consumers into penny pinchers.

Sahar Sedadi, 36, of San Pedro, laid off a year ago as a nonprofit organization executive, has depleted her savings account, maxed out her credit cards and gone without medical insurance.

"You learn to live only with the necessities," she said. "I've been eating a lot more Top Ramen than I ever have in my life, and I'm surprised at how far eggs and potatoes can go."

Therese Gayetty, 47, of North Hills, a multimedia designer looking for at least a part-time job, is renting out a room in her condominium and earning gas money by giving computer lessons to neighbors.

"I had no clue the economy would take the turn the way it did," she said. "This time, it's really bad."

What California needs to get out of its economic distress is a massive stimulus package from Washington, economists said. They called the $6-billion extension of unemployment benefits, approved by President Bush on Friday, a good first step.

"It is good news for the people who receive it, and secondly for retailers. They can use every penny," said Esmael Adibi, an economic analyst at Chapman University in Orange.

The extension provides as many as 33 weeks of additional benefits to many out-of-work Californians.

But the heavy lifting is expected early next year after President-elect Barack Obama is inaugurated, Adibi said. "I would not be surprised if there's a $300-billion to $500-billion stimulus package sometime in the first or second quarter of the year," he said. The program probably would include middle-class tax cuts, public works and direct aid or loans to state governments.

In the meantime, most economists believe, the state's economy will limp along and will not begin to recover until the middle of next year as home sales tick up and prices stabilize, albeit at low levels.

But not every corner of Southern California's economy is grim, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp.

"One piece of good news is we've seen a modest increase in motion picture production for the month and a significant increase for the year," he said. "The studios spooled down during the middle of this year with uncertainty about the Screen Actors Guild contract. Now, they've got to start filling out their slates in 2009 and early 2010."

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marc.lifsher@latimes.com

tiffany.hsu@latimes.com

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