Why does California have the highest unemployment rate in the country?

By Grace Gedye, CalMatters

Nance Parry says she has sent over 1,000 resumes since she was fired in September 2019. She has been interviewed.

Just five weeks into what Parry thought was a six-month contract, she was fired from a job as a documents specialist for an engineering company. She says she’s sent out two to three resumes a weekday since then, but that brought in a total of one interview, which allowed her to live on a monthly Social Security check of $ 1,200, of which $ 1,030 is used to pay the rent for his apartment in Duarte.

“I tried to survive, you know, paying the bills and the food and everything on $ 200 a month after paying the rent,” Parry said. “I need to work.” She needs new glasses and electrical work on her car, but won’t be able to pay for either work until she finds a new job. Her owner has tried to evict her three times, she says, and she’s worried about what will happen when LA County is end of eviction protections in January 2022.

“I don’t know if I’m going to end up living in my car or what because without a job you can’t get an apartment,” she said.

Parry is one of some 1.4 million Californians out of work and looking for work. In October, according to the United States Bureau of Labor Statistics, the state recorded a 7.3% unemployment rate,, the highest in the country, a distinction that California shares with Nevada. The national unemployment rate for October is several points lower at 4.6%.

One of the factors contributing to the state’s employment lag is that California’s large entertainment and hospitality industry – made up of hotels, restaurants and more – hasn’t rebounded as quickly as it did. from the rest of the country. But other data suggests that the news isn’t all bad: there are a lot of job openings and workers are quitting their jobs en masse, which is often a sign that people are optimistic about their ability to find better jobs.

Why is the unemployment rate in California rebounding more slowly?

Even before the pandemic, California’s overall unemployment rate was generally slightly higher than the national rate. But the fact that so many Californians work in the leisure and hospitality industries – which saw massive layoffs at the start of the pandemic – is now contributing to the state’s slow recovery in employment. Leila Bengali, an economist at UCLA’s Anderson School of Management, pointed out that California’s leisure and hospitality sectors employed nearly 18% fewer people in September 2021 than before the pandemic, according to the reports. data from the Bureau of Labor Statistics. Nationally, the industry was only 9% smaller in September than it was before the pandemic.

One explanation for the gap between the rate at which the California hospitality and entertainment industry has recovered jobs and the rate at which the industry has recovered jobs nationwide, Bengali said, is that tourism international, much of the state’s economy, has been particularly hard hit. during the pandemic. Visitors buy lunches in cafes and stay in hotels; when travel dried up, these companies paid the price.

“It’s no coincidence that two states (California and Nevada) that rely heavily on tourism and entertainment haven’t done as well, given the disappearance of tourism and entertainment under COVID,” Manuel Pastor said. , professor of sociology and American studies and Ethnicity at the University of Southern California.

New York, which also has a large tourism industry, has an overall unemployment rate of 6.9%. Florida, another high tourism state, stands out from the high tourism states with an overall unemployment rate of 4.6%. The leisure and hospitality sectors in California, Nevada, New York and Florida have all created jobs more slowly than sectors nationally.

Another potential explanation comes from research by Harvard economics professor Raj Chetty and several other economists, who found that low-wage workers who worked in small businesses in high-rent zip codes – including California many – lost their jobs at higher rates at the start of the pandemic as low-wage workers who worked in small businesses in low-rent areas.

“If you lived in East LA, but got on your bike and a bus to get to Beverly Hills to work a restaurant, or clean a house, or take care of the kids, a lot of that demand is gone. “said Pasteur.

But don’t employers find it difficult to fill positions?

Yes. Walk down any commercial street in a California city and there’s a good chance you’ll see a “Now Hiring” sign in a restaurant or storefront. Employers offered cash bonuses and enhanced benefits to fill vacancies.

The unemployment situation in California “is certainly not a question of a lack of employment opportunities; that’s not what’s happening, ”said Chris Thornberg, founding partner of Beacon Economics, an economics research and consulting firm. “There are an insane number of job openings in our state and across the country.” People can just take their time to find a good job, he said.

There are also indications that low-income families are not under economic stress, Thornberg said. For example, the share of Californian consumers with new bankruptcies is lower than it was before the pandemic.

Many job postings also require physical work in person with unpredictable schedules, such as serving in a restaurant or packing goods in a warehouse. Some people are not willing or able to do this job.

Parry is worried about working in person during the pandemic. “I keep seeing signs in restaurants and stuff like that, it really hurts me because I need work,” she said. She once worked at Cost Plus during the holidays and it hurt her legs. “I’m 71,” she says. “I mean, the last thing I want is a job where I stay up all day because it kills my legs and kills my back.”

“I think right now we’re seeing a lot of people leaving retail, recreation, and hospitality and start looking for other jobs,” said Somjita Mitra, chief economist at the California Department of Finance. Unpredictable schedules make it difficult for workers in these industries to find child care services and use public transportation to get to work. “There are going to be structural changes in these industries in the long term,” she said.

It’s not all bad

Compared to the recovery in employment in California after the Great Recession – when unemployment peaked at around 12.6% and took more than four years to drop to the state’s current unemployment rate of 7.3% – the post-pandemic recovery of the state was a resounding success. During the pandemic, unemployment in the state peaked at 16%, but a year and a half later that number had fallen by more than half.

If workers expect jobs that better match their needs and goals, this may prompt employers to raise the wages of lower-paid workers, for example, or offer them more stable hours – concessions that are good for the job. economics, said Irena Asmundson, chief executive of the California Policy Research Initiative at the Stanford Institute for Economic Policy Research and former chief economist at the California Department of Finance.

“Our economy works really better when we have more balance of power between employers and employees,” Asmundson said.

When will the unemployment rate drop?

A May 2021 Report the Department of Finance forecast that California’s unemployment rate would return to pre-pandemic levels in 2024.

A new report from UCLA Anderson Forecast predicts that California’s unemployment rate will fall to an average of 5.6% in 2022, and decline further to an average of 4.4% in 2023. Authors Jerry Nickelsburg and Leila Bengali also expect slowing job growth in industries with a lot of personal contact, and in industries that cater to tourists.

It is not known whether the unemployment rate of around 4% before the pandemic in California was sustainable, Asmundson said. There is a sweet spot, she said, and while economists disagree on what exactly that sweet spot is, she puts it at 5% for California. She predicts that we will reach this rate in mid 2022.

Other economists believe that we should not worry about the unemployment rate.
“We do not care?” Chris Thornberg asked. “People shouldn’t care,” he said. The most important question, he said, is whether there are job opportunities for people. “The answer is yes, more than ever.”