The Swarm

Mix it up with The Bee's editorial board.

November 21, 2008
Cali Unemployment at 8.2 percent

Economist Steve Levy has a quick analysis of today's California unemployment figures. He points out a puzzling set of numbers that show the labor force growing and the number of unemployed growing far faster than the number of jobs lost. Read his report after the jump:

Today's data showing an 8.2% unemployment rate and 26,400 fewer jobs in October are another indication that the state is plunging into what is likely to be a long and deep recession. Financial market crisis, the loss of wealth for consumers and the growing worldwide recession is feeding on itself as consumers and businesses grow scared and cautious. A continuing decline in consumer spending will deepen the recession before federal government actions can begin to counter the economic downturn.

 Today's data reflects the job situation in mid October and the outlook for the economy has worsened considerably since then.

 Although the economy is headed toward a deep recession there are two additional pieces of information that help in  evaluating today's jobs report.

 FIRST

 The unemployment picture is bad and going to get worse. However, there is a puzzling fact in today's news. The number of unemployed Californians increased by 487,000 over the past 12 months while the payroll data show a loss of just 101,300 jobs. How could this happen?

 One part of the explanation is that some self employed residents, for example, real estate brokers and construction workers, lost their jobs but are not counted in the EDD wage and salary job estimates.

 But the large part of the increase in unemployment was caused by the startling increase of 325,000 people in the labor force. California's labor force increased by 1.8% at a time when the economy was slowing and other data suggest that the number of immigrants coming to California was falling sharply.

 Data for Santa Clara County show the same puzzling trend. Santa Clara's unemployment rate jumped from 4.9% to 6.9% between October 2007 and 2008 while job levels remained flat ( a year over year gain of 800 jobs). Yet the EDD data show a jump of 27,700 or 3.1% in the labor force.  

 SECOND

 The BLS press release http://www.bls.gov/news.release/pdf/laus.pdf allows readers to compare California trends to those in the rest of the country.

 The BLS national release today shows that California is one 12 states to show an increase of 2% or more in the unemployment rate over the past year.  California's 8.2% rate is the nation's 3rd highest behind Michigan and Rhode Island at 9.3%. California's unemployment rate jump of 2.5% over the past 12 months compares to increases of 4.2% in Rhode Island, 2.7% in Florida, 2.6% in Idaho,  2.5% in Nevada, 2.3% in North Carolina and increases of between 2.0 and 2.2% in Arizona, Alabama, Tennessee, South Carolina and Illinois.

 California's reported job losses are in line with national trends. California experienced job losses of 101,300 (-0.7%)

between October 2007 and 2008. National job losses were slightly higher (-0.8%) and several states experienced higher rates of job loss including Rhode Island (-3.0%), Arizona (-2.6%), Florida (-1.9%), Michigan (-1.7%), Georgia (-1.5%) and Oregon (-1.4%).

 IMPLICATIONS

 For people interested in the policy implications, two ideas stand out.

 One is the very strong case for federal financial assistance to state and local governments as part of an immediate stimulus package. I have been writing about this for the past three months and momentum is building within the state and nation but so far no action has been taken.

 This aid to state and local governments is part of a much needed and very large federal stimulus package, hopefully targeted to spending that has a double bonus of creating jobs while laying a foundation for future prosperity, which is why the ideas of infrastructure investment and alternative energy investments are gaining strength.

 Second, the data show that California is a partner in distress with many other states, some of whom are experiencing even greater economic distress. This suggests that the appeal for federal stimulus aid is an appeal in partnership, and not an appeal suggesting that California is specially worthy of aid.

 As CCSCE has been reporting for months budgets for state and local governments throughout the country will face growing deficits for the next two years. Our normal share of say a $50 billion state aid package would be $6-7 billion, which would certainly help protect critical public services.

 We and all states have an unintended but devastating situation where state safety net spending, instead of increasing in difficult times, is one of the first areas to see cuts. This is a case surely worthy of immediate consideration by Congress to help all states faced with cutting safety net spending as we enter a deep recession.

 

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About The Swarm

The Swarm is written by members of The Sacramento Bee's editorial board. They meet daily and are separate from the newsroom. Views included here are those of individual writers, and do not necessarily reflect those of a majority of the board or the positions expressed in The Bee's editorials.

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