Job Cutbacks Accelerating in California

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 the year.

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 jobless statistics.

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 alone.

"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, 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 line."

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."