California’s Unemployment Worse Than National Average

California’s unemployment rate climbed to 11.9 percent in July, the state’s Department of Finance reported — running two and a half percentage points above the 9.4 percent national rate, and underscoring how much harder the recession has hit the country’s most populous state than the country as a whole.

A Silver Lining Buried in a Grim Number

The state’s monthly economic update found one modest bright spot inside an otherwise discouraging report: California lost 35,800 nonfarm jobs in July, but that was actually the smallest month-over-month loss the state had recorded in 11 months, since August of the previous year. Only two of the state’s major industry sectors added jobs that month — leisure and hospitality picked up 2,400 positions, while professional and business services added a modest 500 — while eight sectors continued shedding jobs. Trade, transportation, and utilities took the hardest hit, losing 15,900 jobs, followed by construction at 10,700 and educational and health services at 3,300.

A Full Year of Losses, By the Numbers

Zooming out from the single month reveals the scale of what California had absorbed over the preceding year. Nonfarm payroll employment statewide fell by 760,200 jobs between July 2008 and July 2009 alone — a 5.1 percent year-over-year loss. Construction bore an outsized share of that damage, down 144,500 jobs over the year as the housing market collapse that helped trigger the broader recession hit California’s construction industry directly. Manufacturing lost 124,400 jobs over the same period, and professional and business services shed 132,000. Educational and health services stood out as the sole sector to add jobs year-over-year, growing by 17,900 positions — a pattern of relative resilience in health-related employment that showed up consistently in national jobs reports from this period as well.

Since the national recession officially began in December 2007, California alone had lost 939,700 jobs by this point — a figure that, on its own, exceeds the total employment of many entire U.S. states. The number of unemployed Californians stood at 2,187,000, up 33,000 over the month and a staggering 840,100 higher than the same month a year earlier.

Why California Runs Hotter Than the National Rate

California’s persistent gap above the national unemployment rate through this period reflects the state’s outsized exposure to exactly the industries hit hardest by the housing bust and broader financial crisis: construction, driven by California’s steep home-price declines in markets like the Inland Empire and Central Valley; manufacturing, concentrated in sectors sensitive to both domestic and export demand; and a broader economy more dependent on discretionary consumer spending than many other states’ more diversified or government-heavy economies. That combination meant California’s downturn arrived somewhat later than the initial housing-driven contraction in 2007 and 2008, but hit with disproportionate force once it fully took hold — a pattern that would keep the state’s unemployment rate elevated above the national average for years, even as the broader national recovery slowly took shape.

A Gap That Would Persist for Years

California’s elevated rate relative to the rest of the country wasn’t a one-month anomaly — it would define the state’s labor market for the better part of the following three years. The state’s unemployment rate would go on to hit a modern-era record above 12 percent within the following year, remaining at or above that threshold for more than a year straight before beginning a slow, uneven decline. Not until 2012 would California’s jobless rate finally dip back below 11 percent for the first time since this same stretch in 2009 — a reminder that the gap opening up in this July report wasn’t a temporary dip, but the start of a considerably longer and steeper climb back than the nation as a whole would face.

For related coverage of unemployment trends during this period, see our piece on the national unemployment report from November 2010, or browse our full Labor & Economy archive.