State Posts Tepid Job Growth

Continuing their recent hiring funk, California employers added 6,800 net new jobs in October, falling far below the pace of earlier this year and raising concerns about whether the state’s economy is slowing amid high energy costs and a cooling housing market.

The modest job gain followed a revised loss of 16,600 jobs in September and mirrored tepid job growth nationwide over the last two months. From January through July, the Golden State had been averaging monthly increases of 20,800 jobs, a welcome bout of vitality after sluggish employment growth for much of the first three years following the 2001 recession.

“It’s a disappointing number.... We need 15,000 to 20,000 jobs a month just to keep pace with labor-force growth,” said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.

But given that the United States added only a net 56,000 positions last month -- far below its pace earlier this year -- California appears to be in line with the rest of the nation, Levy said.

The state’s unemployment rate rose to 5.2%, up from 5.1% in September although down from 6% in October 2004. Last month’s rise probably stemmed from an increase in the labor force, as more people entered the market seeking employment.

“That’s often what happens when people are more optimistic” about job prospects, said Keitaro Matsuda, senior economist at Union Bank of California in San Francisco.

He and other analysts suggested that recent declines in gasoline prices could boost job creation in the coming months.

Such a rebound could help answer a key question facing California’s economy: Can it weather a softening housing market?

The real estate sector, including construction, mortgage finance and home sales, has been the state’s single largest engine of job growth. Construction added 63,400 jobs in the last year, nearly double the 32,400 jobs added by the next-strongest category, leisure and hospitality.

But amid rising mortgage rates, home price increases are stalling and sales activity is slowing. Homes are staying on the market longer, as sellers find it harder to get their asking prices. These factors could result in slowing job gains or even job losses like those that hit Orange-based Ameriquest Mortgage Co., which said Thursday it would cut 10% of its workforce nationwide.

Job creation in other sectors continues to be modest at best, amid signs that higher energy costs are prompting employers to be more cautious.

Some economists expect national economic growth to slow in the current quarter, damping California’s economy along with it.

An increasing proportion of the state’s job growth appears to be coming from the so-called informal sector -- self-employed people, independent contractors and others who aren’t counted in the formal employer payroll survey.

These workers instead are counted in a separate survey of households, which showed a much stronger gain of 53,000 jobs in October. The unemployment rate also is derived from the household survey. Many economists, however, consider the household survey to be unreliable, primarily because of its small sample size.

Six of the 11 industry categories tracked by the state posted payroll job gains in October, led by leisure and hospitality with an increase of 8,600. Construction added 4,500 jobs, and education and health services grew by 4,000.

Government posted the largest decline over the month, losing 7,100 jobs, followed by a 4,200 drop in professional and business services and a 2,700 decline in the information category, which includes movie and television production workers.

In part because of “runaway production” of Hollywood movie jobs migrating to states or countries with lower filming costs, the information category has lost 17,000 jobs since June, said Howard Roth, chief economist for the state Department of Finance.

The state’s unemployment rate last month topped the 5% rate for the country overall.

Los Angeles County’s seasonally adjusted unemployment rate was 4.5%, unchanged from September but down sharply from 6.4% a year ago.

Orange County posted a 3.8% unemployment rate, followed by San Diego’s 4.4%, Ventura’s 4.9%, San Bernardino’s 5.1% and Riverside’s 5.5%. Those figures are not seasonally adjusted.