Why does California have the nation’s highest unemployment rate? Three sectors were hit hard
California’s unemployment rate was the nation’s highest in February, as the high cost of living and the loss of construction, machinery and agriculture jobs hit hard.
The state’s jobless rate in February, the latest data available, was 5.3%, up from 5.2% in January and 4.5% a year earlier.
The seasonally adjusted national rate was 3.9% that month. Nevada, at 5.2%, had the second highest state rate. North Dakota, at 2%, was lowest, according to the federal Bureau of Labor Statistics.
The national rate for March was 3.8%. The economy added 303,000 jobs last month, well above most economists’ projections.
But in California in February, “Job losses occurred in nearly all of the major (employment) sectors,” said Michael Bernick,a former California Employment Development Department, now an employment attorney at Duane Morris LLP.
There were notable job number declines in February in construction, due partly to the storms that battered parts of the state this winter, according to EDD.
Also down were the number of jobs in the trade, transportation and utilities area. Declines in consumer spending hurt employment in machinery, equipment and elsewhere, EDD said.
About 17.9 million Californians were employed in February, down 20,100 from January and 82,600 from a year earlier, EDD reported.
There was some good news. Jobs in the private education, health and professional and business services areas were up in February over January.
The state’s unemployment rate for the first quarter of this year is expected to drop. It should average 4.7%, and the averages for 2024, 2025 and 2026 are expected to be 4.6%, 3.8% and 3.9%, respectively, according to last month’s UCLA Anderson economic forecast.
Some experts note that despite being the highest in the country, the state’s economy remains fairly strong.
“Everything else says something different,” said Chris Thornberg, founding partner at Beacon Economics, a Los Angeles-based economic consulting firm.
He referred to other economic indicators. California’s economy grew at a healthy 3.1% rate from the end of 2022 until the end of 2023, the federal Bureau of Economic Analysis said.
There was job growth in some areas. Leisure and hospitality, battered during the COVID-19 pandemic and recovering only recently, added 40,800 jobs year to year and in February employed 2.03 million people.
Education and health care added 180,100 jobs over the year and provided 3.2 million jobs in February.
The outlook for overall improvement, though, is not regarded as strong.
While there are no credible predictions of a recession, many economists do see a slowdown. Higher interest rates over the past two years have lessened demand for housing and other big ticket items, consumers are still reeling from the inflationary price spikes of recent years and the and the tech sector is not booming as it once was.
“The high cost of living in the state, even apart from housing costs, has resulted in employers struggling to hire in entry level jobs in retail, long-term care facilities, home care, and residential construction,” Bernick said.
He found the tech sector overhired as companies recovered from the pandemic that peaked in 2020 and 2021, and are not streamlining.
One hope for tech jobs is how the Bay Area has become the new center of artificial intelligence, “but these start-ups so far are creating a small number of jobs,” Bernick said.
“Tech used to be the workhorse of the state’s economy. It is no longer true,” said Sung Won Sohn, president of SS Economics in Los Angeles. “California is at the leading edge of the national economic slowdown.”
