Job Losses in State Accelerate; July Payrolls Lowest in 2 Years

California employers in July axed a net 21,800 jobs -- half the jobs the entire nation shed last month -- sending payrolls plunging to their lowest level since the state’s job market began its long slide more than two years ago, according to government data released Friday.

The losses marked the largest one-month jobs decline in California since December.

Nearly every sector posted losses -- notably retailing, transportation, manufacturing and business services -- demonstrating a widespread reluctance among employers to hire.

Worse yet, the loss of jobs accelerated at a time when many economists had expected to see some stirrings of growth.

The unemployment rate did drop two-tenths of a percentage point to 6.6% in July, from a revised 6.8% in June. But analysts said that was only because more people quit looking for work and thus are no longer counted in official statistics. The U.S. unemployment rate was 6.2% in July.

Analysts cautioned that the California job loss figures could be slightly distorted because of seasonal factors.

For example, the government sector took the heaviest pounding, in large part because of declines in teaching and other local education positions. But it is tricky to adjust for the summertime ebb and flow of such jobs from public schools.

Still, with communities across the state struggling mightily to close budget gaps, many believe the drop in government payrolls was more than a seasonal fluke.

Through the first seven months of the year, California shed a net 33,200 jobs. Since employment peaked in March 2001, the state has lost more than 293,000 positions -- or 1.9% of its employment base -- marking a new low in non-farm payrolls for this economic cycle.

By comparison, the state lost more than half a million jobs from peak to trough in the brutal recession of the early 1990s.

In July, more than 1.1 million Californians were unemployed, according to the state Employment Development Department. Nearly one-quarter of them have been out of work for more than six months.

“There are still no signs of recovery in the job market,” said Ted Gibson, former chief economist with the state Department of Finance. “There is no upward momentum. It seems to be going in the opposite direction.”

Northern California continued to suffer the worst fallout from the long technology downturn, with the Bay Area posting some of the highest unemployment rates in the state. The jobless rate in Santa Clara County, the heart of Silicon Valley, was 8.4%. The county has seen payrolls contract by more than 200,000 jobs, nearly 19% of its employment base, since employment peaked in December 2000.

Southern California has fared better -- but hasn’t been generating enough economic activity to brighten the state’s overall jobs picture.

In Los Angeles County, the jobless rate fell to 6.8% last month from a revised 7% in June.

Orange County held steady at 4%, as did San Diego County at 4.5%, while Riverside County’s rate went to 6.7% from 6.2% in June and San Bernardino’s dipped to 6.2% from 6.3%. Ventura’s unemployment rate climbed to 5.5% from 5.2%.

California’s massive government sector was the big loser in July, shedding a net 9,600 jobs.

Since January, the sector has shrunk by 31,900 jobs, most in city and county governments, which account for 70% of public-sector employment in California.

From doctors laid off in Los Angeles County to city mechanics pink-slipped in Oakland, communities up and down the state are being forced to tighten their belts.

“Budget woes are hitting local government and we’re just beginning to see the impact now,” said Michael Bernick, director of the state Employment Development Department. “We’re going to continue to see declines.”

The rest of the labor market wasn’t much to write home about either. The manufacturing sector lost an additional 6,500 factory hands in July.

In fact, California’s factories have slashed jobs in 30 of the last 31 months, with total employment down 60,300 jobs since July 2002. And manufacturing hours and average weekly earnings likewise declined, underscoring continued weakness in the state’s industrial sector.

Other sectors posting job losses were health services; trade, transportation and utilities; professional and business services; leisure and hospitality; and construction.

Those that gained were natural resources and mining, information services and financial services.

In percentage terms, California has performed about the same as the rest of the country in job losses over the last 2 1/2 years, with both the state and nation shedding about 2% of their nonfarm payroll jobs over that time.

But economists say California faces unique challenges that could take its job market longer to recover.

A disproportionate number of the state’s job losses were in the technology sector, which has shown no signs of a rebound. In addition, firms have been hit with a string of rising business costs, the most significant being workers’ compensation.

Many companies have seen their workers’ comp premiums double, or even triple, in just the last year.

Because premiums are based in part on the size of a company’s payroll, some employers are slamming the brakes on hiring or even cutting their workforces to reduce costs.

Howard Furst, owner of AAA Flag & Banner Manufacturing Co. in Los Angeles, recently laid off six flag installers in an effort to keep his premiums down after his bill doubled to $400,000.

“These rates are killing us,” said Furst, who employs about 200 workers. “I’m even thinking of moving to Las Vegas.”

Economists say that, for the time being, there appears to be no reliable engine of growth to pull California’s labor market out of its funk.

One of the few sectors to gain jobs over the months, financial services with 900 net additions in July, has been sizzling along with the red-hot housing market.

But with interest rates rising and mortgage refinancing activity cooling down, economists don’t expect that to last.

“Mortgage brokers don’t mess around,” said Howard Roth, chief economist for the state Department of Finance. “If interest rates continue to rise, those jobs are going to dry up fast.”