California jobless dip may prove shortlived
California’s unemployment rate dropped to 14.9% in June, according to state data released Friday.
But economists warn that the economic picture remains highly troubling. The faltering reopening means businesses that rehired workers may lay them off again if they are forced to close. And the legions of unemployed people are also facing a financial cliff when the $600 weekly federal unemployment payments run dry at the end of the month.
California added over a half a million jobs in June, the most of any state, after tacking on 141,600 jobs in May, when the state began to emerge from an economic slumber. It saw a record loss of 2.4 million positions in April under strict shelterinplace orders.
The increase in hiring in the state is “likely the largest monthly gain since World War II,” Michael Bernick, an attorney with Duane Mor
ris who previously ran the state’s Employment Development Department, wrote in an email.
In San Francisco, the unemployment rate stood at 12.5% in June, almost unchanged from a 12.6% jobless rate in May, worse than a decade ago as the city climbed out of the 200709 recession.
With cases of the coronavirus on the rise daily in most California counties and economic activity again curtailed for many businesses, the June snapshot of a state in economic recovery mode is likely to be marred by a stopstart reset, according to Robert Eyler, an economics professor at Sonoma State University and director of the school’s Center for Regional Economic Analysis.
“Because the (virus) cases have gone up and things have gotten more restrictive, how germane those data are to today’s reality are really about how much we’ve gotten off the bottom,” Eyler said.
He said he hopes that there has been decent growth in major sectors of the state economy that are still open, like construction, manufacturing and professional services, and that the growth “can pull the entire economy behind it.”
Industries like tech will also likely help propel the economy, because as many employees work from home and continue to make purchases, Eyler said.
But the reopening reversal will harm sectors like tourism, a major regional economic pillar.
The construction industry added more than 26,000 jobs from May to June, while manufacturing and professional services added 23,400 and 30,400 jobs, respectively, according to the Employment Development Department.
The agency said nine of California’s 11 major industries added jobs last month. Leisure and hospitality led with almost 300,000 jobs, “due to growth in accommodation and food services, which benefited from statewide reopenings of bars and dinein restaurants.” The sector brought back more than a third of the jobs lost in
March and April, the agency said.
Many people brought back on payrolls benefited from emergency forgivable government loans to companies through the federal Paycheck Protection Program, which is designed to allow businesses to keep money flowing to workers during the pandemic.
Despite the June gains, the overall picture still reflects the unraveling of decades of economic growth.
The state is experiencing its worst levels of joblessness in roughly two decades, and the unemployment picture seems to reflect an alternate universe from the one with the record low February rate of 3.9%.
California did see May job gains in all major industries, with the exception of the information sector, which shed over 6,000 positions, and government, which lost more than 95,000. It is unclear how many of those are temporary furloughs and how many are permanent cuts.
Nationwide, an additional 1.3 million Americans filed for unemployment last week, the 17th week in a row that more than 1 million people filed initial claims.
What would normally be eyepopping numbers have become the new normal, with more than 51 million people across the country seeking jobless benefits since the onset of the pandemic.
Some people receiving unemployment assistance say they are concerned about their future when the additional federal payments of $600 per week for the unemployed run out at the end of the month.
“The reality is the state benefits alone will not come close to covering the baseline expenses of paying rent and buying food in San Francisco,” said professional singer and countertenor Aryeh Nussbaum Cohen, who is receiving the payments.
Cohen said he is thinking about leaving the Bay Area for somewhere cheaper.
“There could be a serious exodus from San Francisco of people that can’t keep up with the cost of living during a pandemic,” he added.
Like many others, Cohen struggled for weeks just to secure the unemployment benefits he filed for after the venues where he sings, including the San Francisco Opera, Symphony and Ballet, shut down.
“I spent almost two months calling every day hoping to get through” to the Employment Development Department, Cohen said. He eventually received paperwork from the agency with the wrong name and in Spanish, which he does not speak. Luckily a friend was able to translate for him and he began receiving benefits after clearing further hurdles.
Nussbaum said he has considered plying his trade in Europe, where some concerts have resumed, but he fears catching the virus in transit.
“Us singers who depend on our lungs for our livelihood are being very careful we don’t catch the virus,” he said.
Continuing unemployment claims — those carrying over week to week — are declining despite remaining historically high, according to Sean Randolph, an economist and senior director at the Bay Area Council Economic Institute.
“Some businesses are closing or shutting down indefinitely,” Randolph said. “At the same time, you have other companies bringing back furloughed people or people that were let go,” possibly explaining the stubbornly high new filings and the dip in continuing claims.
He said the state hitting the brakes on reopening sets off alarm bells about the track of the economy through the remainder of the year.
“How do you allow the economy to get underway again with reasonable measures to ensure the highest level of safety possible?” Randolph said. “To the extent the economy has not reopened as planned … the economic damage starts to compound again.”