Friday, 22 January 2010

Unemployment Friday

For California, the big story in the December data release is a very large monthly job loss after a few months of moving sideways in what we always felt was a false bottom. I do believe this drop of 38,000 jobs (on top of an 8,000 job downward revision for November) is finally putting us very close to the bottom statewide, but unemployment will likely drift up a few tenths from its current level of 12.4% this winter.

In the Valley, the real shocking job loss story continues to be Sacramento. Despite the fact that state government employment is holding relatively steady, it continues to post the highest job loss month after month. This month, I think some Lake Tahoe blues are also mixing into the picture, but we see consistently very large declines in discretionary consumer sectors like restaurants (particularly full service) retail and higher end professional and scientific services are declining (which in Sac are very connected to state budgets, unlike in the Bay Area). Furloughs are definitely having an impact on unemployment in the area, as consumer wallets are clearly closed. If it weren’t for disproportionately large declines in the Sacramento labor force, the 12.3% unemployment would surely be even higher.

Other areas in the Valley continue to be weak and post very high unemployment, but nothing that jumps off the charts as a separation from historical and statewide trends like the Sacramento data. All these Central Valley metro areas will be rising to unemployment levels near 20% (and over in the case of Merced) as we hit the normal seasonal trough in farm employment. Fresno continues to fare slightly better than the others as it’s unemployment remains about a percentage point below Modesto and Stockton (historically it is usually the other way around).

In the Bay Area, you see the same story about the lackluster holiday season. Silicon Valley actually registered a slight gain in computer/tech manufacturing, adding another signal that this sector has bottomed and is ready to grow again. San Francisco registered a disapointing one-month drop in jobs (-5000 seasonally adjusted), but it looks like it could be a data anomaly in the government sector rather that will disapear with revisions.

The annual benchmark revisions will be the next release on March 5, and the expectation is that most revisions of 2008 will be downward. We are currently standing at 1.05 million jobs lost in the recession statewide, but the revised data will almost certainly put the total over 1.1 million next month.

About the Author

Ethan Jacob

Author & Editor

I am Ethan Jacob Executive Director of the Center for Business and Policy Research at the University of the Pacific, where I have a joint faculty appointment in the Eberhardt School of Business and the Public Policy Program in the McGeorge School of Law..

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