Unemployment casts a shadow over California’s economy

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

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

Nationally, this rate is 3.7 percent and 353,000 jobs were added in January. California job growth has been slower than the national average over the past year, and the unemployment rate remains stubbornly high – 5.1 percent up a percentage point from a year earlier and only surpassed by Nevada’s 5.4 percent, according to the latest data.

With layoffs in the tech-focused Bay Area, a slow recovery in Southern California after lengthy strikes in the entertainment industry and fluctuating demand for farmworkers, California is facing economic headwinds this new year. And residents feel that.

The state has historically had higher unemployment than the U.S. average because of a younger and fast-growing workforce, said Sarah Bohn, a senior fellow at the Public Policy Institute of California. Still, she noted that California’s labor force has shrunk over the past six months — a troubling trend.

“If we look at this decline: are there fewer opportunities and have people simply stopped looking for work?” asked Mrs. Bohn. “What does this mean for consumers and companies?”

During the early part of the pandemic recovery, California’s unemployment rate was not an outlier: 4 percent in May 2022 versus 3.6 percent nationally, according to the Bureau of Labor Statistics. But the situation deteriorated.

About 36,000 Californians who work in the information industry, including technology, lost their jobs last year. Several state-based major companies – Google, Meta and

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

Despite several bruising 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 new jobs relatively quickly.

The outlook is worse in Southern California, where the ripple effects of last year’s entertainment industry strikes are still having an impact.

Nearly 25,000 workers lost their jobs, according to Hollywood figures report released in December by the Otis College of Art and Design in Los Angeles. While lengthy work stoppages by the Writers Guild of America and SAG-AFTRA ended last fall, some jobs that relied on the industry never returned, and many people have struggled to find full-time work.

Los Angeles County’s unemployment rate is around 5 percent, with information industry jobs, including film and sound recording jobs, accounting for much of the gap.

During the strikes, some restaurants and other small businesses that relied on Hollywood workers closed for good, and others that cut their workforces have not returned to previous levels, said Kevin Klowden, executive director of the Milken Institute, an economic thinker . tank in Santa Monica.

A stagnation in streaming growth has increased financial pressure on many studios, Mr. Klowden said, adding that “peak TV production is generally considered to have already occurred before the strike.”

“There are many stories of actors and crews having difficulty finding consistent work due to the slow ramp-up 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 parts of the state where agriculture is a major industry, the economic situation is even more dire.

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

In a research published in the autumn According to the Public Policy Institute of California, about one in four Californians said the availability of good-paying jobs was a major problem in the local area.

There are economic bright spots. The state has seen job growth in education and healthcare, as well as the leisure and hospitality sectors.

“California is the tentpole of the American economy in terms of American recovery — in terms of job creation, innovation and entrepreneurship,” Gov. Gavin Newsom said in January as he unveiled his budget.

Mr. Newsom’s office released an analysis of the state’s economic prospects for the coming year, noting that “while California’s unemployment rate may be rising slightly faster than the nation’s, it is rising from extraordinarily low levels, reflecting a tight labor market adjusting to more sustainable growth after such a rapid recovery 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 is ample reason to believe that California’s economy will continue to grow faster than the nation’s.”

She noted a recent directive from Mr. Newsom to create a career education master plan that connects students to job opportunities. One priority is removing barriers for people seeking government jobs – including college degree requirements that are not necessary for some duties. according to a sketch of the directive.

But high unemployment will have a domino effect on the state for a while, said Robert Fairlie, a professor of economics and public policy at the University of California, Los Angeles. Unemployment reduces overall revenues, he said, which translates into lower consumer demand and investment.

“There is a negative multiplier effect on the state economy from the higher unemployment rates we are seeing,” Fairlie said.

Elyse Jackson is among those feeling in a pinch.

Ms Jackson, 27, has been out of regular employment since December 2022. As the art department coordinator for feature films in Los Angeles, she had hoped to find work quickly after the strikes ended last fall.

“Rehiring and new productions have been so slow,” said Ms. Jackson, a member of the International Alliance of Theatrical Stage Employees union. She has taken on $15,000 in debt in recent months and is struggling to pay the 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 yet to hear back.

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