State posts huge gain in jobs
But the pace of growth may not continue amid China woes, market turmoil.
California employers added 60,400 jobs in December, according to state data, one of the largest singlemonth gains in the last three years.
That strong job growth lines up with the robust numbers released this month for the U. S. overall. Over the last year, California has added jobs at a rate of 2.9%, faster than the 1.9% growth rate nationwide.
The state unemployment rate, based on a separate survey of households, increased slightly to 5.8% in December from 5.7% in November. The nationwide unemployment rate is at 5%.
Whether that pace of job growth will continue amid tumultuous global markets and an economic slowdown in China is the big question. Market gyrations don’t necessarily correlate with trends in the broader economy, but experts are watching closely to see how long the turmoil lasts.
“We’re in the yellow zone right now — not a red light, not a green light,” said Lynn Reaser, an economist at Point Loma Nazarene University in San Diego. “We don’t know exactly how long or how damaging this sell- off could be.”
Because of its location on the Pacific Rim, California is slightly more exposed to the
slowdown in China than the rest of the nation. The agriculture industry in particular has already seen the effects as exports of dairy and nut products have declined.
But California exports to China still represent only about 1.1% of the state’s $ 2.3trillion economy. Much like the U. S. overall, the bigger risk to California’s economy could come from prolonged volatility in global f inancial markets, which could dampen business investment and consumer confidence.
Venture capital activity slowed down in California at the end of last year, with funding declining from $ 12.1 billion in the third quarter to $ 6.8 billion in the fourth quarter, a 44% decline, according to research f irm CB Insights.
Non- residential investment ( equipment, buildings, software) in the U. S. for the third quarter last year was up only 2.3% from the prior year. For the same period in 2014, investment grew 7.2% from a year earlier.
Sung Won Sohn, an economics professor at Cal State Channel Islands, pointed to other indirect challenges to the U. S. economy related to China’s slowdown. For example, if China stops buying iron ore from Brazil, then Brazil is likely to stop buying wine from Napa Valley.
Sohn believes the markets are already dampening consumer confidence and that job growth in California has peaked.
“It’s not that we are going to expect a significant setback,” he said. “But probably the best days, in terms of economic and job growth, are behind us.”
But other economists also pointed out that news of the China slowdown has been trickling out through much of last year, with little impact on jobs.
“The world is a crazy place right now, no doubt about it, and the stock market is extremely volatile,” said Bill Watkins, an economics professor at California Lutheran University in Thousand Oaks. “But if you look just at the stock market, you’d be predicting a lot more recessions than we’ve had.”
California’s huge job gains in December came after a more tepid increase of 7,200 jobs in November. The November f igure was revised up from 5,500.
Over the last year, the fastest growth has come in the construction industry, which expanded payrolls at a rate of 8.6%, and professional and business services, which grew at a 5% rate.
Manufacturing growth was down slightly for the year. The biggest loss for the year: a 9.6% decline in the mining and logging sector, which is tied to the energy industry.
Jerry Nickelsburg, an economist with the UCLA Anderson Forecast, in December predicted a 2.1% growth rate for California’s job market this year — slightly less than last year. He said Friday that none of the events so far this year has caused him to rethink those projections.
“Throughout the expansion, we’ve seen our trading partners go into a recession, so will it have an impact? Yes,” Nickelsburg said. “Will it be enough to derail the expansion? No.”
Robert Kleinhenz, chief economist with the Los Angeles County Economic Development Corp., agreed with that assessment.
“Financial markets notwithstanding, I think the U. S. economy is well poised to keep growing yet another year,” he said.