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May 24, 2011 > California jobless rate dips below 12 percent

California jobless rate dips below 12 percent

By Adam Weintraub, Associated Press

SACRAMENTO, Calif. (AP), May 20 - California's unemployment rate dropping below 12 percent for the first time in nearly two years marks a milestone in the state's economic recovery, but the road ahead is still long and bumpy, economists say.

The April jobless rate of 11.9 percent, announced Friday by the state Employment Development Department, declined for the fourth straight month and is the lowest rate since August 2009, but it came amid tepid and uneven job growth that lagged behind the rest of the nation.

Job growth and economic recovery matter not only to the unemployed, but to governments and public services from one end of California to the other. Personal income taxes are a major source of state revenue; a recovery with little job growth has implications for state and local budgets for years to come.

The jobless rate has dropped 0.5 percentage point in a year, from 12.4 percent in April 2010, but mostly because there are fewer people in California's estimated labor force than there were a year ago. While the state is adding jobs, many construction, finance and retail workers idled by the 2008 housing bust and recession have not seen work return in their industries. The recovery is mainly being felt along the Pacific Coast and in skilled professions.

``Dipping below 12 percent is not that meaningful and continues to reflect a labor force that has shrunk,'' said Jeff Michael, director of the Business Forecasting Center at the University of the Pacific's business school in Stockton. ``The economy is generating jobs again, but at a very slow pace.''

The most robust job growth is in sectors that demand specialized skills, such as technology, and concentrated in Silicon Valley, Orange County and other coastal urban centers. Unemployed workers in the Central Valley and Inland Empire, whose skills are a bad fit for those growth industries, continue to struggle.

``California's economic output is at a level equivalent to where it was before the recession, but we're doing it with fewer people,'' said Chris Thornberg, a founding partner with Beacon Economics. Some of those idled in the downturn may never find work again in their old fields and need training to enter new industries, he said. ``This is a social crisis, not an economic one.''

Edgar Calderon, of Sacramento, has been working short-term jobs on contract and commission since he was laid off from his advertising job with a foreign language media company after the downturn. He never applied for unemployment benefits, so ``I'm one of the numbers they don't count.''

Calderon said the jobless rate doesn't reflect the true employment picture because many workers are like him - employed, but underemployed, and scraping to pay their mortgage and keep up with the high price of gasoline.

``I've been working with different people, but it's not the same, and we're hurting,'' he said. ``I get what I can, but it's not enough. It's not like having that check you can count on every two weeks.''

California payrolls grew overall by about 8,900 jobs in April.

The added jobs represented a tiny slice of the California economy. The state had slightly more than 14 million nonfarm payroll jobs in April, according to a survey of businesses, and that number has increased by only about 1 percent, or 144,400 jobs, since April 2010. ``That's roughly keeping up with population growth,'' Michael said.

Six industry sectors added jobs in April, with the biggest bump coming in leisure and hospitality, which added 12,400. Five saw declines, with the largest drop of 11,200 jobs in government.

Stephen Levy, chief economist for the Palo Alto-based Center for the Continuing Study of the California Economy, said April job growth was modest but the good news might continue into May, considering the stock market's appetite for shares from LinkedIn Corp.'s initial public offering this week.

``The strong performance of LinkedIn shares is a positive sign for the state economy and for the possibility of one-time capital gains income to the state from IPOs,'' Levy said.

The improving economy is already helping to shrink California's state budget deficit. Gov. Jerry Brown this week said the state will get a boost of $6.6 billion in unexpected revenue through July 2012 from higher sales, personal income and corporate tax receipts.

Both Brown's administration and the nonpartisan legislative analyst's office attribute much of the gains to California's high-income earners, who contribute more under the state's tax structure. In 2009, the top 1 percent of wage earners paid 37 percent of the state's income taxes.

Employment data can be contradictory and confusing because they are based on data collected in different ways from both employers and households. In addition, the size of the workforce can shrink when jobseekers go back to school or become discouraged, which complicates interpretation of the unemployment rate.

The employer survey captures information about payroll jobs, but a separate survey of households also counts self-employed workers. That household survey for April showed an estimated 15.9 million people in California held jobs, an increase of 37,000 from March but down 21,000 since April 2010. Although the number of employed people shrank, the estimated labor force shrank more, so the jobless rate declined.

Economists tend to rely more on the payroll data, which is based on a larger sample and considered more reliable.

Nationwide, unemployment rates fell in 39 states in April, and employers added workers in 42 states.

Businesses in the U.S. have added more than 250,000 jobs a month, on average, in the past three months, the fastest hiring spree in five years. The U.S. unemployment rate has dropped nearly a full percentage point since November, but it rose slightly in April to 9 percent, in part because bad weather slowed the hiring of farm workers.

In California, about 584,000 people were receiving regular unemployment benefits during the week in April when the employment survey was conducted. That's down from about 631,000 in March and 729,000 in April 2010.

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Associated Press writer Judy Lin contributed to this report.

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