The state is faring worse than the nation, reports show. Analysts say
the budget crisis and the tech industry slump will hamper a recovery.
By Marla Dickerson
Times Staff Writer
June 14, 2003
California's labor market deteriorated sharply in May as the state's
employers shed 21,500 jobs -- even as the rest of the nation combined gained
jobs, according to government data released Friday.
The cutbacks were felt across a wide spectrum of the economy, which is
being weighed down by a massive budget gap and ballooning business costs.
The job losses are the largest since December and mark the fourth consecutive
month of payroll declines in California.
Analysts said the state, after outperforming the nation through much of
the economic downturn, has become one of the weakest labor markets, in large
part because of the continued technology downturn in the Bay Area. Southern
California, meanwhile, has fared better.
Since February, California has lost a net 54,300 jobs, or nearly 0.4%
of its nonfarm jobs, double the national rate. More worrisome, the pink slips
appear to be accelerating at a time when many economists had predicted they
would level off in anticipation of employment growth in the second half of
A state Employment Development Department survey showed that California's
jobless rate dipped to 6.6% in May from a revised 6.8% in April. But economists
said that was largely because so many people have stopped looking for work,
gone back to school or left the state and thus are no longer counted in the
California's long-suffering technology sector cut additional jobs in May,
as did factories, which have shrunk their payrolls now in 28 of the last 29
months. The construction, retailing, government and business services sectors
all axed positions as well, signaling widespread pessimism among employers.
Analysts said a slew of negative factors have converged in the state and
that could make its recovery tougher than that of the rest of the nation.
They include unprecedented state budget woes, skyrocketing workers' compensation
costs, a sluggish tourism sector and continued weak demand for high-tech goods,
the state's biggest export.
"All these things are discouraging hiring," said economist Esmael Adibi,
director of the Anderson Center for Economic Research at Chapman University
in Orange. "California is going to lag the rest of the country."
The national economy lost a net 17,000 nonfarm payroll jobs last month,
driving the U.S. jobless rate to a nearly nine-year high of 6.1%, the Labor
Department said. Employment nationwide has fallen by 289,000 over the last
four months, with nearly 1 in 5 of those losses in California.
California's labor market is a tale of two economies, with Southern California
holding its own while the Bay Area continues its long slide.
The Southland added jobs on a seasonally unadjusted basis in May and still
boasts some of the lowest unemployment rates in the state. Orange County,
for example, posted a seasonally unadjusted unemployment rate of 3.6% in May.
The unadjusted jobless rate last month for Los Angeles County was 6.3%.
In contrast, unemployment in Santa Clara County, home of such Silicon
Valley giants as Cisco Systems Inc. and Intel Corp., stood at 8%. The county's
labor force has shrunk by 10.6% since employment peaked in December 2001
as workers have fled for greener pastures.
Dale Bott, a former Bay Area computer technician, lost his $20-an-hour
job with a dot-com in 2001. Unable to find anything paying close to that after
the tech bubble burst, he moved last year to New Mexico, where he stocks grocery
shelves for $6.25 an hour in Truth or Consequences.
"If I had stayed in California, I'd be living in the street," said Bott,
53. "I'm a reality guy.... This job doesn't pay a lot, but at least the cost
of living is a lot lower here."
It's a choice that more of California's 1.2 million jobless residents
are confronting in the face of a stingy labor market. The state's long-term
unemployment has been climbing for 20 straight months, with 22.6% of all
jobless Californians now out of work for 27 weeks or more.
Former software executive Brett Trusko is among them. Laid off two years
ago, the 42-year-old Danville resident has been unable to find a full-time
technology position, even though he holds a doctorate and is a certified public
accountant. He said refinancing has helped his family hang on to its house,
but he's not sure how much longer they can hold out on his wife's salary
"We've thought about moving to Vegas," Trusko said. "We'd like to stay
here, but we'd leave if the right opportunity came up."
There were some bright spots in the May employment data. Five of 11 large
industry clusters tracked by state analysts added jobs last month, including
the so-called financial-activities sector, which includes California's red-hot
real estate industry.
Anthony Hsieh, founder and chief executive of HomeLoanCenter.com, said
business is so brisk at the Irvine mortgage lender, thanks to record-low rates,
that the company is looking to beef up its staff of 400.
"People in the mortgage business are very busy these days," Hsieh said.
"We're lucky to be among them."
Economists say most other industries in the state are grappling with sluggish
sales and soaring business costs, a combination that's slamming the brakes
on hiring. Particularly nettlesome is workers' compensation. The state's system
is in chaos, with premiums doubling and even tripling for many companies over
the last few years, leading some to freeze hiring or lay off employees to
keep costs down.
"A lot of businesses are in a precarious profit position," said Jack Kyser,
chief economist with the Los Angeles County Economic Development Corp. "They
are trying their darndest not to add workers because it hits their bottom
Richard Pocrass, chief executive of Chocolates a la Carte Inc., a Valencia
maker of specialty chocolates, said his firm laid off nine of his 150 workers
after his workers' compensation premiums doubled to $500,000. To expand his
family's business, which will post $12 million in sales this year, Pocrass
said he will automate more of the production process and outsource to Asia.
What he won't do, Pocrass said, is hire more people.
"This is a complete change of direction for us," Pocrass said. "We have
to find a way to grow without adding employees. California makes it too expensive."