For the second month in a row, California recorded the highest unemployment rate in the country, according to new data from March. And it was one of only two states, the other being Nevada, to post an unemployment rate above 5% in March, the Bureau of Labor Statistics said.
On the positive side, data released Friday by the state Employment Development Department showed that California’s job growth recovered last month, although the improvement remains below average national.
California’s unemployment rate remained steady at 5.3% last month, even as unemployment nationwide fell to 3.8% in March.
Over the past year, California’s job growth has lagged the nation as a whole, largely due to the deleterious effects of high interest rates on three pillars of state economy: high technology, entertainment and housing.
Analysts say California’s near-term job growth will likely remain relatively weak, but the long-term outlook looks more promising.
Despite the immediate hiring slump, the state’s budget woes — including the costs of unemployment claims — and stubbornly high inflation, experts believe California will neither fall into a recession nor lead the nation in a slowdown.
On the one hand, the American economy as a whole continues to experience good growth. The country’s gross domestic product, or total economic output, likely grew a solid 3% in the first quarter, according to analyst forecasts. The GDP report will be released on Thursday.
California’s increased reliance on industries such as real estate, which are highly sensitive to interest rates, for financing and investments has hampered the state.
Still, unlike the housing crisis that caused the Great Recession of 2007-2009, many homeowners are not saddled with undervalued loans or defaulting on their payments. The overwhelming majority of people in California and the rest of the country are employed, and most homeowners are locked into fixed-rate mortgages that are considerably lower than the current rate of about 7 percent.
“In general, housing often functions as a trigger or force multiplier during a recession in California,” said GU Krueger, a longtime Los Angeles housing economist.
In fact, about 90% of homeowners qualify for home loans at rates below 5%, said Joseph Brusuelas, chief economist at accounting firm RSM US.
So even though more and more California consumers are having trouble with their credit card debt, data shows that mortgage delinquencies remain very low.
Additionally, even though inflation has been higher than expected, analysts still forecast a gradual decline in consumer prices this year and expect the Federal Reserve to begin cutting interest rates this summer or this fall, which will likely be the start of a series of rate cuts. reductions.
“California is going to muddle through until we start seeing these rates go down,” Brusuelas said.
In March, the state added 28,300 net new jobs, about 9% of the national total, less than its 11.5% share of the U.S. labor force. In February, California lost 6,600 jobs while the United States added 270,000.
For the first quarter, California saw an increase of 47,300 payroll jobs, or about 5.7% of the national total.
At the same time, the state’s unemployment rate increased from 4.5% in March 2023 to 5.3%, while the U.S. unemployment figure increased slightly from 3.5% to 3.8% during the same period.
In March, California’s job growth continued to be driven by gains in health care and private education. Over the past year, this combined sector accounted for more than 80% of jobs created in the state, a total of 217,700. This was followed by growth in the public sector, construction, and recreation and the hotel industry.
But important sectors of the economy, including information, business and professional services, and manufacturing, have lost jobs over the past year.
The state Employment Development Department’s report Friday continued to show a wide disparity in unemployment rates by county, with those in the Central Valley and some rural areas in the double digits, while the Bay Area and Orange County were less than 4%.
For Los Angeles County, the seasonally adjusted unemployment rate in March remained unchanged at 5.4%. During the month, the county added 14,900 jobs, about half the state’s total. The largest increase, 6,200, was recorded in health services and social assistance. But commerce and transport lost 3,100 jobs.
Information companies created 2,000 jobs in March. But over the past 12 months, the high-paying sector has lost 30,600 jobs in Los Angeles County, almost entirely due to losses in the movie theater, where employment has been slow to rebound after labor strikes. Hollywood last year.
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