Bleak employment numbers obscure good news in California economy

The headline numbers in today’s California employment report (12.5% unemployment and a 4,900 job gain) give a misleading reading of the improvements in the California economy during the pat two months.

Job growth in November, originally reported 1,600, was revised upward to 30,500 based on gains in manufacturing, retail trade and services.

And the job growth for December includes losses of 15,400 government jobs and additional losses of another 3,200 construction jobs.

The losses in construction and government are, indeed, restraining the state’s near term jobs growth and that is likely to continue into 2011.

On the other hand job growth in the other sectors is picking up in response to higher levels of economic activity. Job growth in December would have been 23,500 without the losses on government and construction.

This week the ports in Southern California reported a record year for exports and strong gains in overall trade volumes. Activity is picking up across the board (tourism, entertainment, venture capital, retail trade) except in the housing sector.

The three metro areas with the largest concentration of technology firms showed the largest job gains in 2010 led by Orange County (+20,700 jobs) followed by San Jose (Silicon Valley with 8,500 jobs and San Diego with a gain of 6,500 jobs.

The slowest job growth is in the areas most hard hit by the housing downturn—the Inland Empire (Riverside and San Bernardino) and the Central valley—where most metro areas had continuing job losses in 2010.

Though the economic outlook looks better than it did two months growth in 2011 will still be modest, not enough to reduce unemployment substantially or reduce the budget shortfall that faces the state. However, the prospect for income growth for those who have jobs has brightened.

In sum, the California economy is really three different economies these days. Growth in sectors outside of construction and government is picking up in contrast to continuing job losses in these two sectors. Growth in the coastal and especially the coastal tech centers is picking up while job losses continue in areas hard hit by the housing downturn. And income growth prospects for those with jobs is improving while job prospects for unemployed residents remain scarce.

To see the full report from the Employment Development Department, click here.

Steve Levy is director of the Center for the Continuing Study of the California Economy.

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