California’s unemployment rate rose to 5.4 percent in June from 5.2 percent in May, its first increase in almost six years, the Employment Development Department reported Friday.
The department called it “a stark departure from prevailing trend in that it was the state’s first unemployment increase since September 2010 ... when the economy was only just emerging from the recession.”
Economists cautioned that one month does not make a trend, and that the unemployment rate is based on a small sample of roughly 5,500 California households and is frequently revised.
Furthermore, the unemployment rate can rise when people lose jobs (a bad thing) or join the labor force (a good sign).
The rate is the number of people actively seeking a job (the unemployed) divided by the number of people working or seeking work (the labor force).
Often, when the economy is near full employment, people who had postponed or given up looking for a job enter the labor force and the unemployment rate goes up, even if the number working also goes up. The U.S. unemployment rate last month rose to 4.9 percent from 4.7 percent in May, partly because of people re-entering the job market.
In California, the estimated number of people with jobs in June was 18,078,000, down 4,000 from May but up 308,000 from June of last year. The number of unemployed Californians was 1,022,000 in June, up 27,000 from May, but down 160,000 from June of last year. Last June, the state unemployment rate was 6.2 percent.
All these numbers are seasonally adjusted to smooth out hiring binges and busts such as a decline in construction employment during the winter and an increase in holiday hiring.
On a non-adjusted basis, the state unemployment rate jumped a full percentage point — to 5.7 percent in June from 4.7 percent in May.
The unadjusted unemployment rate typically goes up between May and June as recent graduates enter the workforce, teens look for summer jobs and some school-related jobs end. However, last month’s 1 percentage point increase was much larger than usual. Since 2000, the largest previous May to June increase was 0.8 percent in 2003, said Brandon Hooker, an economist with the department.
No Reason for Concern Seen
Hooker said these numbers are often revised and he would not be concerned “unless we have a series of months where we see these increases.”Jerry Nickelsburg, an economics professor at the UCLA Anderson School of Management, said the numbers do not indicate that the economy has taken a turn for the worse.
“When you are near full employment, you expect slowing job growth because there are two places you can get workers: people who are unemployed and would like a job, and people who are entering the labor force” through population growth. When unemployment is low, job growth is limited because there are simply fewer people to fill job openings.
The government conducts a separate survey of employers each month that is larger and less variable than the household survey. This employer survey showed that nonfarm jobs in California rose to 16,459,700 in June, up by 40,300 jobs (0.2 percent) over May and by 461,000 jobs (2.9 percent) compared with June of last year.
The survey showed job growth in seven categories over the past month, led by leisure/hospitality and professional/business services. Four categories posted job losses: trade, transportation and utilities; information; construction; and other services.
“There were a few weak spots” in that report, but “nothing on the radar screen to suggest we are in for a big slowdown here,” said Scott Anderson, chief economist with Bank of the West.
Christopher Thornberg, founder of Beacon Economic, puts no faith in one month’s unemployment rate. “You need to have multiple data sources saying the same thing multiple times for it to be believable,” he said.
“There has been a little bit of a slowdown reflecting, I think, the national slowdown,” he said. “We know that venture capital has slowed a lot recently. Is that because of something slowing fundamentally in technology? The answer is no. Plenty of evidence suggests that demand for (information technology) goods is still strong. Plenty of information suggests that profitability is going to remain solid for these companies. When you add that up, there is no reason for venture capital to slow down.”
‘Still an Employees’ Market’
Ireneo Mendoza, a regional vice president with staffing firm Robert Half International, agreed that “venture capitalists are a little bit more careful about where they are spending. Hiring is still up, there are just more steps” to get hired than there were in 2014-15.In the Bay Area, “It’s still very busy, it’s still an employees’ market. We have seen them take a job” and three to six months later take another job. Companies here are willing to pay for top talent,” he said.
Mendoza was speaking about white-collar technology, finance, legal and other corporate jobs.
For other positions, it’s not so easy finding a job. Hooker said there was a “big influx” of 16- to 18-year-olds into the job market last month. “The labor force participation rate for that group has increased,” he said.
Liam Butler, 17, recently got a part-time job at the Castro Theater in San Francisco but said, “It was a very slow process.” He knew someone who worked there who thought the recent School of the Arts graduate would be perfect, “but even then it was hard. I wasn’t the only person up for it,” he said.
He said almost all of his friends and classmates who are working got jobs only where they knew someone.
©2016 the San Francisco Chronicle Distributed by Tribune Content Agency, LLC.
