California’s unemployment rate fell to 3.9% in July, the lowest point since 1976, as employers in the nation’s most populous state continued to defy expectations by creating 84,800 new jobs.
Record inflation coupled with a slowing housing market have prompted warnings of an economic slowdown as consumers react to high commodity prices, from groceries to gasoline.
But new figures released Friday by California’s Department of Employment Development show that its labor market has so far been immune to these problems, as the state recorded job growth of month to month in 17 of the last 18 months.
Nationally, unemployment rates fell in 14 states in July, rose in three states and remained the same in 33 states, according to the US Bureau of Labor Statistics. California now has an unemployment rate slightly lower than Texas, but higher than Florida and Alabama – all Republican-led states whose leaders, California Democratic Governor Gavin Newsom, have stood disputed in recent months.
Ten of California’s 11 industrial sectors saw job growth in July, led by strong gains in computer systems design, advertising, security services and health care. While California accounts for 11.7% of the nation’s civilian workforce, the state accounted for 16.1% of all new jobs in the United States last month.
The job gain comes despite declining job postings in the state and sales of single-family homes — a major driver of California’s economy — slowing 14.4% in July from June and falling. up 31.1% from a year ago, according to the California Association of Realtors. The California housing market reflects an overall slowdown in nationwide home sales, which decreased in July for the sixth consecutive month.
“It’s certainly surprising,” former EDD director Michael Bernick said of the job gains in California. “It runs counter to all other economic indicators.”
California lost more than 2.7 million jobs in just two months at the start of the pandemic in 2020, when Newsom issued the first statewide stay-at-home order that forced many businesses to close.
It took more than two years for California to recover most of those jobs. Job growth in July means the state has recovered 97.3% of those pandemic job losses.
The main reason for the drop in the unemployment rate is the large number of new jobs added in July. But another factor is that 23,400 people stopped looking for work in July, reducing the state’s workforce. Some industries continue to experience labor shortages, primarily in restaurants and hotels, according to Sung Won Sohn, an economics professor at Loyola Marymount University.
“I think the labor force will grow in the future because people need to earn extra income to fight inflation,” he said. of an impending recession, if we are not already there, will encourage people to look for work.
Bernick, now an attorney with the Duane Morris law firm that closely follows the California labor market, said he suspects the state is still being propped up by billions of dollars from federal stimulus spending and the state budget surplus. The Cut Inflation Act recently passed in Congress will send more money to the state, reducing some prescription drug costs while helping millions of people pay their monthly health insurance premiums.
“It’s not going to last forever,” he said.
California’s budget includes $9.5 billion in refunds to about 23 million people, which Newsom touted Friday when bragging about the state’s low unemployment rate.
“We have historic reserves and are putting money back into people’s pockets as we continue to lead the country’s economic recovery,” Newsom said in a press release.