Job Growth in California Outpaces U.S.

Despite falling exports and other signs of economic weakening nationally, job growth in California proved to be remarkably resilient last month.

State officials said Friday that California’s payrolls in September expanded by a robust 35,500, garnering more than half of the rather anemic 69,000 jobs created nationwide last month. Although California mirrored the nation’s drop-off in high-tech manufacturing and had another troubling month in motion pictures employment, those losses were more than offset by impressive gains in apparel manufacturing, food processing, transportation and computer services.

“It’s rather stunning,” said Howard Roth of Bank of America, who, like other economists, was both surprised and heartened by the latest jobs report from the state Employment Development Department.

California’s jobless rate rose to 6% from 5.8% in August, but economists attributed that largely to new entrants to the job market, including people from out of state who see more opportunities in California. The U.S. unemployment rate also edged up to 4.6% from 4.5%.

Although California businesses are more exposed to the Asian crisis, notably exporters of computers and other electronics in the San Jose area, the state as a whole continues to outpace the nation in new-job formation--a key indicator of economic health. That trend is expected to continue and will probably become stronger in the coming months. California’s economic expansion is three years younger than the nation’s, now in its seventh year, and the state appears to have considerable steam left, particularly in Southern California.

The state’s job growth this year has shifted dramatically in favor of the more diverse economy in the south, as the Asian crisis and sagging stock market have disproportionately hurt the Silicon Valley and San Francisco. Based on annual comparisons, two-thirds of the jobs added in the state last month were generated in Southern California, compared with less than half at the start of the year.

Southland Leads the Way

In Los Angeles County, business services, a category that includes software firms, and garment manufacturing led the payroll growth last month. The jobless rate for the county increased to 6.5% from 6.3% in August.

Housing-related industries provided a solid boost in Orange County and even more so in the Inland Empire, where construction employment in the two counties of Riverside and San Bernardino exceeded the peak in 1989. By comparison, construction payrolls in Los Angeles County remain more than 40,000 jobs shy of the peak in early 1990.

“If you stand up and hold a hammer right, you’ve got a job here,” quipped John Husing, a regional economist in San Bernardino. By his calculations, payroll employment from San Diego to Ventura in September was up by 3.1% from a year earlier, compared with a growth rate of 1.8% for Northern California. “It isn’t really a California story, it’s a Southern California story,” he said.

Still, Friday’s report showed that job growth in California is nonetheless slowing, although perhaps not as sharply as some had feared earlier this summer.

For the third quarter, including July when the state added virtually no new jobs, California’s nonfarm employers created an average of 24,200 net jobs a month--about one-sixth of the national growth. But that compares with a monthly rate of 30,700 in California in the first half of this year and an average of 49,000 in the third quarter of 1997.

Moreover, there are increasing signs that layoffs are accelerating in California and the nation because of the softening demand in Asia and weakening confidence among businesses and consumers. In a report Friday, the Chicago outplacement firm Challenger, Gray & Christmas said that layoff announcements nationally in October had already reached 100,000, far surpassing the total for the entire month of September.

“The blizzard of cuts is reminiscent of the peak months of downsizing earlier in the decade,” said John Challenger, the firm’s chief executive. A separate report produced by Challenger for The Los Angeles Times showed that job cuts in September approached 9,000 in California, and the total job cuts reported this year in the state through September were 71,470--compared with 46,624 for last year.

Pockets of Construction Activity

The bulk of the cuts have come from makers of computers and other electronics and industrial machinery, and that was evident in the state’s job report Friday. Statewide, durable manufacturing fell by 2,500 jobs last month, with computer equipment makers’ payrolls down by 500, electronics components off by 400 and communications equipment down by 300.

Aircraft manufacturing employment, which had made small gains in previous months, tapered off, and indications are that the Asian crisis will further crimp this industry. Makers of guided missiles and space vehicles shed 600 jobs last month, mostly in Northern California.

Factory jobs overall rose statewide last month by more than 11,000 jobs, mostly because of a burst of hiring by food processors, who are reacting to the late and smaller harvests caused by the El Nino storms this year. Similarly, farm employment in the state rose by 8,300 jobs, to just shy of 400,000, but that figure remains nearly 7% below the level of a year earlier.

Construction employment, while exceptionally strong in pockets of California, statewide lost 2,500 jobs. But Ted Gibson, chief economist at the state Department of Finance, said that sector was probably underestimated by government officials, whose monthly survey of company payrolls last month fell on the week of Labor Day, resulting in an undercount of workers who took the holiday off.

Seasonally adjusted, retailers added a modest 2,200 jobs. Although many big chain stores have been expanding in California, hiring has been constrained by the difficulty of finding workers in tight labor markets such as Orange County, where the unemployment rate held steady at 3.1%. Retail trade employment in California was up just 1.8% over a year ago, compared with growth rates of 3% for the wholesale trade sector, 8.4% for construction and 2.8% for all nonfarm industries.

The services sector continued its long, robust expansion, adding nearly 12,000 jobs. Temporary help firms accounted for some of those additions, but in an emerging nationwide trend, California temporary agencies are getting fewer new orders.

Kim Megonigal, president of Kimco Staffing Services Inc., which has 25 offices throughout the Southland, said that partly reflects employers converting many temporary employees to permanent employees because of the tight labor market. But he added: “I am seeing a slowdown in new orders,” attributing it partly to eroding confidence on the part of businesses.

Two once-vibrant elements of the services sector are being hurt by the Asian crisis and the strong dollar--and both are affecting Southern California. Engineering and management

services fell noticeably, and motion pictures dropped even more sharply to a level that was below last year’s.

“We’re seeing a significant leakage of television production to Canada,” said Jack Kyser, economist at the Los Angeles Economic Development Corp. Kyser said the strong dollar, along with softening demand in Asia and smaller commercial advertising activity domestically, have held back filming.

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New Jobs

July

California: 3,600

U.S.: 270,000

Aug.

California: 33,500

U.S.: 160,000

Sept.

California: 35,500

U.S.: 69,000

Source: Employment Development Department

Unemployment Rate

Orange County’s unemployment rate held steady at 3.1% in September:

1997

Sept. 3.5%

Sept. 3.1%

Source: California Employment Development Department