Today’s article in the L.A. Times does a good job explaining why the unemployment rate going up is actually good news. Chuck
California employers continued a nearly four-year hiring streak by adding 54,200 jobs in May, one of the largest monthly employment jumps in the last year.
The state’s unemployment rate edged up to 6.4%, slightly higher than 6.3% in April, but significantly down from a rate of 7.6% a year earlier, according to data released Friday. Economists saw the small uptick in unemployment as encouraging, however, because more people entered the state’s labor force last month than at any time in the last quarter of a century — a sign of renewed confidence in the job market.
California jobs numbers for May
The construction industry continued to be state’s fastest-growing job creator, expanding at more than twice the rate of California’s overall job growth. Although there are still far fewer Californians working in construction than at the peak of the housing bubble in 2006, the industry is rebounding swiftly.
Just as California’s real estate market was one of the hardest hit by the economic downturn, experts said housing and construction jobs are some of the quickest to bounce back in an expansion. Because California’s property values tend to be higher than the rest of the U.S., the state is exposed to larger swings in parts of the economy tied to real estate.
“We are going up faster because we went down faster,” said Sung Won Sohn, a professor of economics at Cal State University Channel Islands.
Many of the commercial projects are multiyear projects, so I think construction will remain strong for quite some time.- Mark Vitner, senior economist, Wells Fargo
Mike Holwick, a principal at Holwick Constructors in Woodland Hills, said the company pulled in more revenue last year than at any time since he took over the business in 2002. His firm specializes in interior office construction for the entertainment and legal industries. In the last two years, he said, his clients have splurged on employee lounges, TVs throughout the office and much higher-end finishes.
The company typically subcontracts work to other companies, but construction workers are in such high demand that Holwick has had difficulty relying on the subcontractors he used in the past.
“They’re just stretched thin,” Holwick said. “In the last two years, I’ve had more subcontractors decline to bid than I did in the previous 10. They’re too busy.”
Although land is scarce for single-family home construction in Los Angeles County, economists said the commercial market and infrastructure projects at Los Angeles International Airport and the ports of Los Angeles and Long Beach should bring continued demand for construction work.
“There’s a whole lot of work in the pipeline,” said Mark Vitner, a senior economist at Wells Fargo who studies regional economic trends. “Many of the commercial projects are multiyear projects, so I think construction will remain strong for quite some time.”
Other rapidly growing industries in California over the last year included professional and technical services — high-paying architects, engineers and consultants — and the lower-paying leisure and hospitality sector.
After nearly five years of consistent declines in California’s unemployment rate, the one blip in May’s economic data was a small increase, from 6.3% in April to 6.4% last month. The national unemployment rate is 5.5%.
The rate is measured by dividing the number of unemployed by the state’s total workforce — those who have jobs or are actively seeking them.
At times during the Great Recession, unemployment rates declined because some people gave up looking for work, decreasing the number in the workforce. The opposite was true in May, when the labor force expanded by 71,800 people.
That’s the largest monthly increase since 1990, one that economists say bodes well for future job growth.
“When the economy is lousy, people simply drop out of the labor force and think it’s a waste of time,” said Sohn, the economist. “Now people are coming out of the woodwork, believing there are jobs to be had.”
L.A. County’s unemployment rate remains higher than the state average, at 7.6%, down from 8.3% a year ago. Unemployment in the Inland Empire, not seasonally adjusted, was 6.4%, and Orange County logged a 4.2% unemployment rate.