Gov. Jerry Brown delivered a mixed economic message to the Legislature last week – hailing California’s strong recovery from the Great Recession but warning it could quickly turn sour.
The good news: “Two million jobs have been created, and unemployment has dropped in half.”
The caveat: “Here at the state Capitol we often think we have more control over things than we actually do. But the truth is that global events, markets and policies set the pace and shape the world we live in.”
A day after Brown delivered his sober-sided message, urging legislators to build budget reserves against the likelihood of recession, his Department of Employment released job data for December, closing out 2015.
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Superficially, the numbers looked good. The state added another 60,400 jobs during the final month of the year, raising the total for 2015 to about 265,000 and the recovery over six years to 2.2 million.
The state’s unemployment rate in December, 5.8 percent of the workforce, was a full percentage point lower than a year earlier and less than half of what it was during the depths of recession.
A deeper dive into economic data, however, reveals that the recovery has been uneven, both socio-economically and geographically.
Since 2007, for instance, the San Francisco Bay Area, with 20 percent of the state’s population, has generated well over half of the state’s employment growth. Conversely, Los Angeles County, with a 25 percent of the population, has produced less than 10 percent of the new jobs.
There obviously is an ethnic component to that contrast. The Bay Area is largely white and Asian, while Los Angeles is mostly Latino, a group with overall low educational and income levels.
One reason for the declining unemployment rate is that the state’s “labor participation rate” – the proportion of working-age adults who are working or looking for work – also has been dropping, from a high of 69 percent in 1989 to about 62 percent today.
Were 69 percent of adults in the labor force today, our unemployment rate would be well over 10 percent. Furthermore, California has the nation’s second highest rate of “labor underutilization,” meaning we have too many workers who want full-time work but are stuck in part-time jobs.
Comparing employment sector-by-sector reveals that the strongest growth has been in fields requiring extensive training and education, such as medical care or technology, and in low-skill jobs such as hotel and kitchen workers. Middle-income jobs, such as those in manufacturing, are stagnant at best.
These and other data inspire sharp debates over the direction of the economy, even without the specter of recession.
Beacon Economics, headed by Christopher Thornberg, produced a recent report for Next 10 California that portrays California as a leading generator of new jobs – the fourth highest, proportionately, among the states in 2013 – and creator of new businesses.
Thornberg’s arch-rival, Cal Lutheran University economist Bill Watkins, responded with a critique calling Beacon’s report “seriously flawed,” and adding, “California has been in the top 10 only once since 2001” and that was 2013, the year chosen by Beacon for its report.
California’s economic glass is either half-full or half-empty. Take your pick.