Intersections: A Monthly Go-To for Reliable Facts and Analysis About California's Debt, Investments and Economy
 

Vol. 1, No. 2, Published June 8, 2015

The CalCheck Report: Update on California’s Economic Health

By Lynn Reaser

California's labor market continues to show robust and steady gains. The state scored another strong jobs report in April, featuring employment gains across most industries and a further reduction in the jobless rate.

Employers added 29,500 jobs to their payrolls, putting the year-over-year increase at 2.9 percent. This compared to a national gain of 2.2 percent and marked the 38th consecutive month that California has outperformed the nation. (See Figure 17.)

On a month-to-month basis, payrolls appear to have flattened out in such generally strong areas as construction, health care, and tourism after the government's estimates of normal seasonal influences. However, those adjustments are imperfect. On a year-over-year basis, California saw substantial gains in every major sector with only the relatively small mining and lumber industry posting a decrease. (See Figure 18.) This drop reflects the fall in oil and commodity prices over the past year.

California's unemployment rate fell to 6.3 percent in April from 6.5 percent in March and stands at the lowest level since February 2008. (See Figure 19.) The state's jobless rate is now about half of its peak of 12.2 percent reached in October 2010. California's jobless rate has also now dropped to less than 1.0 percentage point above the nation's 5.4 percent rate, representing the narrowest difference since September 2007.

Housing was a key force pushing the state into recession and making the downturn particularly severe. Its recovery is now a major factor boosting the state�s economic prospects.

According to the California Association of Realtors (CAR), sales of existing single-family homes reached a seasonally adjusted annual rate of nearly 428,000 units in April. This was the first rise above the 400,000 mark since October 2013.

Compared with a year ago, sales of single-family homes throughout the state were up 9.3 percent. (See Figure 20.) Sales in the Inland Empire (Riverside and San Bernardino County) were up 10.4 percent. Sales throughout the Central Valley were up by 20 percent or more.

Sales are rising faster than the number of homes being put on the market. As a result, inventories are tight and prices are rising. As of April, houses were on the market for an average of only about 3.6 months versus a more typical six- to seven-month period. Prices were up an average of 9.2 percent across California.

California�s housing recovery is driving a number of positive ripple effects. It is supporting activity in the real estate industry, new construction and home furnishings. Importantly, it is bolstering the financial standing of many households by boosting their home equity, a critical factor to the state�s economic well-being.

Figure 17: California Outperforms the Nation

Nonfarm Employment, Percent Change Over Prior Year

April marked the 38th consecutive month that California employment has outperformed the nation.

Source: Fermanian Business and Economic Institute

Figure 18: Strong Jobs in All Major Sectors

California Employment, April 2015, Percent Change Over Prior Year

On a year-over-year basis, California saw substantial gains in every major employment sector with only the relatively small mining and lumber industry posting a decrease.

Source: Fermanian Business and Economic Institute

Figure 19: California�s Jobless Rate Declines

Percent, Seasonally Adjusted

California's unemployment fell to 6.3 percent in April from 6.5 percent in March and stands at the lowest level since February 2008.

Source: Fermanian Business and Economic Institute

Figure 20: California Housing Market Strong

Sales of Existing Single-Family Homes, Percent Change Over Prior Year

Compared with a year ago, sales of single-family homes throughout the state were up 9.3 percent.

Source: Fermanian Business and Economic Institute

Lynn Reaser is chief of the Treasurer’s Council of Economic Advisors and chief economist at the Fermanian Business and Economic Institute for Point Loma Nazarene University. The opinions in this article are presented in the spirit of spurring discussion and reflect those of the author and not necessarily the Treasurer, his office or the State of California.