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State unemployment rate falls to 9.8% even as employers shed jobs

December 21, 2012|By Ricardo Lopez
  • California's unemployment rate fell to 9.8% in November, the lowest in almost four years, the U.S. Bureau of Labor Statistics said Friday. Above, Shari Eknoian, human resource manager for RiteAid Corp. listens to job seeker Ryan Truong during a job fair in San Jose this month.
California's unemployment rate fell to 9.8% in November, the lowest… (David Paul Morris / Bloomberg )

California's unemployment rate hit single-digits in November for the first time in almost four years, thanks in part to a holiday hiring surge by retailers.

The jobless rate fell to 9.8% from 10.1% in October, according to data in an overall jobs report released Friday by the state Employment Development Department.

The drop in the unemployment rate, determined in a survey of households, came even as a separate payroll survey found that employers in the state shed 3,800 jobs.

“The state showed a very significant and encouraging drop in the unemployment rate,” said Lynn Reaser, chief economist at the Fermanian Business and Economic Institute at Point Loma Nazarene University. “A fall below 10% is welcome news.”

For months, economic forecasts have said the unemployment rate wouldn’t fall to single digits until at least next year.

Both surveys in the report provide a mixed view, though, of what is still a fragile economic recovery in the state.

For instance, the state's labor force -- the number of people who are able to work and either have a job or are looking for one -- grew by 34,100 people in November. That typically indicates that job seekers feel encouraged to resume looking for work again.

“The good news in California was that we saw more people looking for work and more people getting jobs,” Reaser said. “But the bad news was that the nonfarm payroll survey, which is usually the more reliable source, showed a small drop in employment ... and comes as quite a disappointment.”

The payroll survey of employers showed that the biggest drop in jobs -- 11,000 -- came in the education and health services sector. The manufacturing sector lost 8,900 positions. The biggest gains offsetting most losses came in retail, which added 15,900 jobs.

The disparity between the falling unemployment rate and the drop in payroll jobs reflects the fact that the two are derived from different surveys: The unemployment rate is calculated from a survey of a small number of households, while the payroll job data come from a more thorough survey of businesses that report on changes in their monthly payrolls.

Other economists were skeptical of November’s reports, particularly losses reported in the healthcare and professional and business services sectors.

“Over the last year, [these sectors] have been very strong,” said Christopher Thornberg, founding principal at Beacon Economics, a Los Angeles consulting firm. “Why should it turn on a dime?”

Thornberg pointed out that healthcare has been resilient, expanding even through the economic recession.

He said he expects November’s job report to be revised early next year and the loss in payroll jobs will probably be reversed.

“The truth is, [the report] is not as good as what the household survey says, but it’s not as bad as the payroll survey,” Thornberg said. “None of this should be a surprise to us. California’s economy has clearly been gaining strength.”

In recent months, employers in the retail trend industry have beefed up payrolls as the 2012 holiday shopping season shapes up to be the strongest in years. The trade, transportation and utilities sector notched the largest over-the-month increase, as a group adding 12,900 jobs. The sector includes retail jobs.

The next-largest gain was in leisure and hospitality, which added 3,300 jobs. Construction, aided by a housing recovery that is slowly unfolding, notched a gain of 1,700 jobs last month.

Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University, called the report a “mixed bag.”

“Overall, yes, unemployment went down,” Adibi said. “Some people will see that as good news, but the question will be: Is this downtick going to be sustainable?”

Adibi said that even though the job figures are adjusted for seasonal hiring, he predicted that much of the retail hiring that has occurred in recent months will be temporary. Furthermore, losses in professional and business services suggest that firms are holding out on hiring until the so-called fiscal cliff crisis is resolved.

The fiscal cliff refers to the tax hikes and government spending cuts set to kick in Jan. 2 if Congress and the White House don't reach a deal to resolve those issues.

Economists have said that if the fiscal cliff is not avoided, the country will be pushed back into recession.

“If firms are worried about a significant slowdown, they’re not going to commit themselves to hiring people,” Adibi said.

Over the year, California has added 268,600 nonfarm jobs, an annualized growth rate of 1.9%. That's a faster pace than the nation as a whole, which has grown at an annual rate of about 1.4%.

The Golden State’s unemployment rate, still the third-highest in the nation, has fallen 1.5 percentage points since November 2011.

The state also reported that October’s job gains were revised slightly downward to 38,800 jobs net new jobs instead of the 45,800 originally reported last month.


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