California jobless rate steady at 7.6%, but experts say labor market picking up steam

(CN) — California’s unemployment rate remained at 7.6% in July, with employers adding 114,400 payroll jobs. That rate remains above the national 5.4% unemployment rate, according to numbers released Friday by the U.S. Bureau of Labor Statistics and the California Employment Development Department.

July’s numbers mirror the state’s unemployment rate for June, which was initially forecast at 7.7% before being revised downward to 7.6%. It is the lowest unemployment rate since March 2020 and a considerable decrease from July 2020, which saw the jobless rate at 13.2%.

Economics experts see encouraging signs for California’s recovery in the July numbers.

“The jobless rate remained unchanged as the labor force rose indicating that the labor market is humming again,” Sung Won Sohn, a professor of finance and economics at Loyola Marymount University, said in an email.

Sohn attributed most of the labor force’s gains to the leisure and hospitality sector, which added 56,600 jobs last month and “accounted for 49% of employment gains in July.”

Government and education and health services saw the next largest increases to their payrolls.

“Now that most schools are open again and the bonus unemployment benefits will expire in early September, there could be more adults returning to workplace,” said Sohn, pointing to the increases in labor participation.

Governor Gavin Newsom, waging a campaign to survive next month’s recall election, touted the state’s progress since the start of the Covid-19 pandemic.

“California continues to lead the nation’s economic recovery, adding 114,400 new jobs in July — more new jobs than any other state, and the fourth time this year of six-figure job gains,” Newsom said in a statement. “We’ll continue to lead with the science and data, prioritizing vaccinations and supporting those workers and small businesses hit hardest by this pandemic, to create the conditions for a robust economic recovery.”

Through July, California has regained 58.3% of the jobs lost in March and April of 2020. But the state still has over 1.4 million people unemployed, more than any other state. It also has one of the highest unemployment rates in the country, tied with New York and New Mexico at 7.6%. Only Nevada (7.7%) and Puerto Rico (8.2%) had higher rates of unemployment.

“Employment growth in construction and other goods-producing sectors was worryingly stagnant,” said Jeffrey Clemens, an associate professor of economics at the University of California, San Diego. Clemens also noted that, despite strong gains, California’s leisure and hospitality sector still must add a lot of jobs to return to its pre-pandemic levels.

Additionally, the delta variant remains a factor going forward in the economic recovery.

“We have a couple of nervous months ahead as we see how economic activity responds to the growth in Covid-19 cases associated with the delta variant,” Clemens said.

Sohn said the spread of the delta variant and the ensuing restrictions could potentially dampen further economic progress.

“Another full-scale economic shutdown is highly unlikely, but partial economic restrictions have already been introduced,” said Sohn. “It could also reduce the availability of labor by making potential employees more cautious about returning to work. As the virus infections multiply, demand could suffer if consumers turn cautious again.”

And as California grapples with drought, Sohn said water supply is another factor that could play an integral role in the state’s economic trajectory.

“Recreation, agriculture and many types of production are very sensitive to the availability of water, which is in short supply,” said Sohn.

The California numbers come two weeks after the nationwide statistics showed 943,000 jobs added during the month of July. Clemens said California accounted for 12.1% of those new jobs, “which is almost perfectly in line with the state’s share of the [national] population.”

Clemens said that employment across California “remains roughly 6.5% below its level from February 2020.”  He noted that compared to other populous states, California’s labor market is performing better than New York but worse than Texas, meaning “there is clearly room for California’s labor market to do better.”

Statewide, unemployment rates are over 10% in six counties, including Los Angeles at 10.2%. LA County’s unemployment rate dropped from 10.5% in June, which Sohn attributed in part to the entertainment industry ramping up production.

Rates in other major counties include San Diego (6.9%), San Francisco (5.2%), Orange (6.3%), Sacramento (7.3%) and Fresno (9.3%).