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

Vol. 1, No. 1, Published May 6, 2015

 

The CalCheck Report: Update on California’s Economic Health

By Lynn Reaser

New homes are under construction in Sacramento's Pocket neighborhood.

stock market bull

California’s economy continues to move forward as 2015 progresses. The recovery is both deepening and broadening. It is deepening in terms of large gains in jobs and falling unemployment and widening in terms of sectors and geographies.

California defied the national slowdown in job growth in March, posting another solid rise in employment and a drop in the unemployment rate. The state added nearly 40,000 jobs between February and March, putting the average gain during the first quarter also at 40,000. In the first quarter of 2014, job growth averaged 37,000.

On a year-over-year basis, California has outperformed the nation in terms of job growth for 37 consecutive months. (See Figure 16.) In March, nonfarm payrolls were up 3.1 percent from a year ago versus the national gain of 2.3 percent.

The state’s ongoing job gains are also allowing it to chip away at its jobless rate. In March, California’s unemployment rate fell to 6.5 percent from 6.7 percent in the prior month. The jobless rate is now at the lowest level in seven years and is almost half the 12.2 percent peak reached in October 2010. (See Figure 17.)

Job growth remains widespread across industries and sectors. March payroll jobs were up in all major sectors compared with February, except for information (such as newspaper publishing and telecommunications), financial services, recreation, and mining/logging. In contrast, sizable gains occurred in construction, manufacturing, business and professional services, retail and wholesale trade, transportation, and health care. (See Figure 18.) Relative to a year ago, payrolls in all major sectors are up with the exception of mining and logging, which has been impacted by the drop in oil and commodity prices.

The end of port disruptions caused a significant rebound in support services for water transportation. After a loss of 1,900 jobs in the prior two months, employment in this sector jumped by 2,800 in March as shippers scrambled to catch up on backed-up cargos.

California continues to benefit from a special impetus from its sparkling technology cluster. Technology gains are spanning a wide range of jobs, including those involving various web applications, consumer electronics, wireless devices, biotech, environmental science, and transportation vehicles.

California's solid job gains are a sign that employers have regained considerable confidence to resume stronger hiring. (See Figure 19.) These increases in turn should boost consumer optimism and spending, triggering a positive feedback cycle that should propel the economy further ahead.

Figure 16: California Outperforms the Nation

Nonfarm Employment, Percent Change Over Prior Year

On a year-over-year basis, California has outperformed the nation in terms of job growth for 37 consecutive months.

Source: Fermanian Business and Economic Institute

Figure 17: California’s Jobless Rate Declines

Percent, Seasonally Adjusted

The jobless rate is now at the lowest level in seven years and is almost half the 12.2 percent peak reached in October 2010.

Source: Fermanian Business and Economic Institute

Figure 18: New Jobs in All Major Sectors

California Employment, March 2015, Percent Change Over Prior Year

Construction, professional and business services, and leisure and hospitality led the way in job growth in March 2015.

Source: Fermanian Business and Economic Institute

Figure 19: California Hiring Expands

December Change Over Prior Year, Thousands

California hiring continues to expand.

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.