Economic Update

More signs are emerging that California’s economy is stabilizing.  Job losses have moderated dramatically, and even though construction has slowed, the demand for homes remains very strong. 

•   Despite losing 9,000 industry jobs in May, California has created 500 nonfarm jobs, on average, each month this year—a total of 2,500.  In 2001, the state lost 2,200 jobs each month, on average.

• In May, services and government were the only two major industry divisions that gained jobs.  Government employment gains (2,400) were made chiefly at the local level, with public schools accounting for nearly half.  The state’s service industries reversed losses suffered in April by adding 7,200 jobs.  Business services, which includes temporary service and computer programming firms, followed a 200-job gain in April with 1,800 new jobs in May.  April’s growth was the first for this sector since it started to slide in October 2000.  

• Weak building activity made the construction industry the leading job loser in May—dropping 9,600 jobs in its third consecutive month-over-month loss.  Manufacturing followed with a loss of 5,000 jobs—principally in high technology.  However, these high-tech losses were the smallest since February 2001. 

•  Compared to a year ago, industry employment in California was down 51,000 in May.   Falling high technology employment led the manufacturing sector to shed 95,000 jobs over the year.  Transportation and public utilities lost almost 34,000 jobs, over half of them coming from air transportation.   

• For the 12th month in a row, government was the year-over-year job growth leader.  Since May 2001, the public sector has added nearly 71,000 jobs, the vast majority of which were in local public schools.   

•  The San Francisco Bay Area continues to suffer the most from the current slowdown with industry employment falling by over 90,000 over the past year.  Santa Clara County’s unemployment rate measured 7.1 percent in May, more than double the rate from a year-ago.  On the other hand, the Riverside-San Bernardino metropolitan area has become the state’s fastest growing region—adding jobs at a 3.2 percent year-over-year rate.

• California's unemployment rate dropped to 6.3 percent in May from a revised 6.5 percent in April.  The improvement resulted from reductions in both the labor force and the number of unemployed persons.  In contrast to the steady rise that took place throughout 2001, the state’s unemployment rate appears more stable—averaging 6.4 percent for the first five months of 2002. 

•   Following a burst of activity early in the year, construction in California has slowed significantly and still trails last year’s pace.  Residential construction, as measured by permitting activity, reached a seasonally adjusted, annual rate of 149,000 units in May, a 3 percent drop from a year ago.  For the first five months of 2002 as a whole, residential construction was off slightly from the same months of 2001.  Regionally, home building has improved in only three of the state’s major metropolitan areas—Orange County, Riverside-San Bernardino, and Sacramento. 

• Similarly, nonresidential construction in May, as measured by permit values, was off almost 25 percent from a year ago.  The slowdown is being led by dramatic reductions in office building and industrial construction.