Jobless rate rises in California, falls in Sacramento area
By Dale Kasler
The Sacramento Bee
Published: Saturday, Sep. 17, 2011 - 12:00 am | Page 1A
© Copyright The Sacramento Bee. All rights reserved.
California's job market has stalled, the latest numbers show, and some economists say another recession isn't out of the question.
The state's unemployment rate rose to 12.1 percent in August, an increase of a tenth of a point, the Employment Development Department said Friday. Payrolls shrank by 8,400, the second straight month in which the state's job numbers turned negative.
The figures echoed the weak job numbers reported for the nation earlier this month – and intensified fears of a double-dip recession. In a double dip, the economy turns negative before it's even fully recovered from the last recession.
"I wouldn't call it a recession ... but it is going backward," said Howard Roth, chief economist at the state Department of Finance. "And if this goes on very long, it will be a recession."
To many Californians, it probably feels like another recession has started already – or maybe the old one never ended. But the fact is the mass layoffs have tapered off, and California has added 98,500 jobs this year.
A new recession would mean another downward spiral.
While California was stuck in reverse last month, Sacramento's job numbers were surprisingly strong. Unemployment dropped to 11.9 percent, from 12.5 percent in July. The region gained 6,200 jobs.
But much of the growth appeared to be seasonal. The start of the school year generated 5,000 new jobs in education. Justin Wehner, a labor market consultant at EDD, said unemployment traditionally falls 0.4 percent in August.
Nonetheless, there was also unusually strong hiring in the all-important construction sector, which added 2,300 jobs. Sacramento had more construction jobs in August than a year ago – the first time that's happened since 2007.
It wasn't clear, with the new home market still moribund, what prompted the hiring surge. There may have been a recent flurry of activity on public-works or commercial projects, and "my concern is it could be a temporary thing," said economist Jeff Michael of the University of the Pacific.
In other industries, the outlook wasn't good. Cici Mattiuzzi, a career counselor who advises engineering and computer students at Sacramento State, is stunned by the scarcity of employers recruiting on campus.
"It's the worst I've ever seen it," she said.
For a while, the picture was improving. Roth said California gained 25,500 jobs a month the first four months of the year. Since then, the state has lost an average of 925 jobs a month.
"We started out this year pretty darn well. but then it started to fall apart," he said.
A survey of economists published by the Wall Street Journal on Friday put the chances of a new recession over the next year at 1 in 3.
Not everyone agrees. "Take a deep breath," said Chris Thornberg, a private economic consultant in Los Angeles.
He said the job numbers simply reflect the slowdown from earlier this year, caused by a runup in energy prices and the supply-chain disruption caused by the earthquake and tsunami in Japan. Another factor was last month's Verizon Wireless strike, which temporarily cost California several thousand jobs, he said.
"The underlying fundamentals in California remain OK (but) not great," he said.
Sung Won Sohn has less faith. An economist at California State University's Channel Islands campus, he said there's a 40 percent chance of a recession. That's up from 15 percent a few months ago.
"It's not going to take a whole lot to push the economy, both the U.S. and California, over the brink," he said.
Sohn, vice chairman of the Forever 21 retail clothing chain, said consumers are taking cues from businesses and are spending cautiously.
"The biggest problem I see is the psychology, the lack of confidence," he said.
Though California has the second highest unemployment in the U.S. – behind Nevada – the state does have some bright spots, particularly the Bay Area's tech economy.
But even in Silicon Valley, it seems the fates are conspiring against California. The Financial Times said Facebook has postponed its initial public stock offering until late 2012.
That could deprive the state treasury of hundreds of millions of dollars in capital gains taxes in the next few months, putting additional strain on the budget. In turn, that would raise the prospect of public worker layoffs in Sacramento and elsewhere.
The figures echoed the weak job numbers reported for the nation earlier this month – and intensified fears of a double-dip recession. In a double dip, the economy turns negative before it's even fully recovered from the last recession.
"I wouldn't call it a recession ... but it is going backward," said Howard Roth, chief economist at the state Department of Finance. "And if this goes on very long, it will be a recession."
To many Californians, it probably feels like another recession has started already – or maybe the old one never ended. But the fact is the mass layoffs have tapered off, and California has added 98,500 jobs this year.
A new recession would mean another downward spiral.
While California was stuck in reverse last month, Sacramento's job numbers were surprisingly strong. Unemployment dropped to 11.9 percent, from 12.5 percent in July. The region gained 6,200 jobs.
But much of the growth appeared to be seasonal. The start of the school year generated 5,000 new jobs in education. Justin Wehner, a labor market consultant at EDD, said unemployment traditionally falls 0.4 percent in August.
Nonetheless, there was also unusually strong hiring in the all-important construction sector, which added 2,300 jobs. Sacramento had more construction jobs in August than a year ago – the first time that's happened since 2007.
It wasn't clear, with the new home market still moribund, what prompted the hiring surge. There may have been a recent flurry of activity on public-works or commercial projects, and "my concern is it could be a temporary thing," said economist Jeff Michael of the University of the Pacific.
In other industries, the outlook wasn't good. Cici Mattiuzzi, a career counselor who advises engineering and computer students at Sacramento State, is stunned by the scarcity of employers recruiting on campus.
"It's the worst I've ever seen it," she said.
For a while, the picture was improving. Roth said California gained 25,500 jobs a month the first four months of the year. Since then, the state has lost an average of 925 jobs a month.
"We started out this year pretty darn well. but then it started to fall apart," he said.
A survey of economists published by the Wall Street Journal on Friday put the chances of a new recession over the next year at 1 in 3.
Not everyone agrees. "Take a deep breath," said Chris Thornberg, a private economic consultant in Los Angeles.
He said the job numbers simply reflect the slowdown from earlier this year, caused by a runup in energy prices and the supply-chain disruption caused by the earthquake and tsunami in Japan. Another factor was last month's Verizon Wireless strike, which temporarily cost California several thousand jobs, he said.
"The underlying fundamentals in California remain OK (but) not great," he said.
Sung Won Sohn has less faith. An economist at California State University's Channel Islands campus, he said there's a 40 percent chance of a recession. That's up from 15 percent a few months ago.
"It's not going to take a whole lot to push the economy, both the U.S. and California, over the brink," he said.
Sohn, vice chairman of the Forever 21 retail clothing chain, said consumers are taking cues from businesses and are spending cautiously.
"The biggest problem I see is the psychology, the lack of confidence," he said.
Though California has the second highest unemployment in the U.S. – behind Nevada – the state does have some bright spots, particularly the Bay Area's tech economy.
But even in Silicon Valley, it seems the fates are conspiring against California. The Financial Times said Facebook has postponed its initial public stock offering until late 2012.
That could deprive the state treasury of hundreds of millions of dollars in capital gains taxes in the next few months, putting additional strain on the budget. In turn, that would raise the prospect of public worker layoffs in Sacramento and elsewhere.
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