California economy stuck by unemployment

For decades, California’s giant economy has outpaced that of most countries, playing an outsized role in shaping global trends in technology, entertainment and agriculture.

While that reputation remains, the state has a less viable distinction: one of the highest unemployment rates in the country.

Nationally, the rate is 3.7 percent and in January the country added 353,000 jobs. Job growth in California has been slower than the national average over the past year, and the unemployment rate remains stubbornly high. 5.1 percent in the latest data, a percentage point higher than a year earlier and exceeded only by Nevada’s 5.4 percent.

With layoffs in the tech-centric Bay Area, a slow rebound in Southern California from prolonged strikes in the entertainment industry, and variable demand for farmworkers, California faces economic headwinds opposites in the new year. And the residents feel it.

The state has historically experienced a higher unemployment rate than the U.S. average due to a younger and rapidly growing workforce, said Sarah Bohn, a senior fellow at the Public Policy Institute of California. Still, she noted, the labor force has declined in California over the past six months — a worrying trend.

“Looking at this decrease, are there fewer opportunities and have people simply stopped looking for work?” » asked Ms. Bohn. “What does this mean for consumers and businesses? »

At the start of the pandemic recovery, California’s unemployment rate was no exception: 4% in May 2022 compared to 3.6% nationally, according to the Bureau of Labor Statistics. But the situation has deteriorated.

About 36,000 Californians working in the information sector, including technology, lost their jobs last year. Several large companies based in the state – Google, Meta and X, formerly known as Twitter – have cut tens of thousands of positions to cut costs as the industry increasingly shifts artificial intelligence.

In recent weeks, Snap, the Santa Monica-based parent company of messaging app Snapchat, announced it would cut about 500 employees, or 10% of its global workforce. And Northrop Grumman, the aerospace giant, announced plans to lay off 1,000 workers in the Los Angeles area.

Despite several difficult months, the unemployment rate in San Francisco and Silicon Valley remained relatively low – 3.5 percent in the city and 3.2 percent in San Mateo County – indicating that many workers found a new job relatively quickly.

The outlook is worse in Southern California, where the fallout from last year’s entertainment industry strikes continues to be felt.

Nearly 25,000 workers lost their jobs in Hollywood, according to a report published in December by the Otis College of Art and Design in Los Angeles. Even though extended work stoppages by the Writers Guild of America and SAG-AFTRA ended last fall, some industry-dependent jobs never returned and many people struggled to find employment full time.

The unemployment rate in Los Angeles County is about 5 percent, with jobs in the information industry, which includes jobs in film and sound recording, accounting for much of the deficit.

During the strikes, some restaurants and other small businesses that relied on Hollywood workers closed permanently, and others that reduced their workforces did not return to previous levels, said Kevin Klowden, executive director of the Milken Institute, an economic studies firm. reservoir reservoir in Santa Monica.

The stalled streaming growth has put increased financial pressures on many studios, Mr. Klowden said, adding that “the peak in television production is generally recognized as having already occurred even before the strike.”

“There are a lot of stories of cast and crew struggling to find consistent work due to the slow pace of new productions,” he said.

After a Hollywood strike in 2007-2008, it took a year for the industry to recover, and this time — with continued losses — it will take even longer, Mr. Klowden said.

For areas of the state where agriculture is a key industry, the economic situation is even more dire.

In Imperial County, a part of the Mexican border long known for its agricultural production, the latest unemployment rate was about 18 percent, up 3.1 percentage points from the previous year. And Tulare County, in the Central Valley, has an unemployment rate of about 11 percent, up 2.7 percentage points. Automation was a factor.

In a survey published in the fall According to the Public Policy Institute of California, about one in four Californians said the availability of good-paying jobs was a big problem in the region.

There are positives on the economic front. The state has seen job growth in the education and health care sectors, as well as the leisure and hospitality sectors.

“California is the backbone of the American economy in terms of America’s recovery – in terms of job creation, innovation and entrepreneurship,” the governor said. Gavin Newsom said this in January when unveiling his budget.

Mr. Newsom’s office released an analysis state economic outlook For the coming year, noting that “although unemployment in California is rising a little faster than the rest of the country, it is falling from an extraordinarily low level, reflecting a tight labor market adjusting to more sustainable growth after bouncing back so quickly in the wake. of the pandemic-induced recession.

Dee Dee Myers, director of the Governor’s Office of Business and Economic Development, said in a statement: “There are many reasons to believe that California’s economy will continue to grow faster than the nation’s. »

She highlighted a recent directive from Mr. Newsom to create a blueprint for career education that connects students to job opportunities. One priority is to reduce barriers for people seeking employment in the state, including unnecessary college degree requirements for some positions, according to a diagram of the directive.

But high unemployment will have a ripple effect on the state for some time, said Robert Fairlie, a professor of economics and public policy at the University of California, Los Angeles. Unemployment reduces overall incomes, he said, which results in lower consumer demand and investment.

“The higher unemployment rates we’re seeing have a negative multiplier effect on the state’s economy,” Mr. Fairlie said.

Elyse Jackson is one of those feeling the pinch.

Ms. Jackson, 27, has not had a stable job since December 2022. Coordinator of the feature film art department in Los Angeles, she hoped to find work shortly after the end of last fall’s strikes.

“Rehiring and new productions have been very slow,” said Ms. Jackson, a member of the International Alliance of Theatrical Employees union. She has fallen into $15,000 in debt in recent months and is struggling to pay rent on the apartment she shares with her partner in the Echo Park neighborhood.

Unable to wait for a job in her industry, she recently filled out dozens of applications for administrative work in the city. She has not yet received a response.

“Skills-wise, I’m certainly qualified for these jobs,” Ms. Jackson said. “There seems to be a lot of competition because of the market and unemployment.”