The Future of Employment in California Appears Cloudy

When California’s monthly report on employment was issued last week — telling us what the situation was in October — Gov. Gavin Newsom quickly issued a celebratory statement.

“California has now fully recovered all jobs that were lost to the pandemic-induced recession, but we know this isn’t the finish line,” Newsom said, making a plug for his economic programs to counter rising consumer costs and “to help create thousands of jobs and opportunities for Californians throughout the state.”

Newsom claimed that “California has recovered 101.1% of the 2,758,900 jobs lost during the recession — the state is now 30,800 jobs above the pre-pandemic level total of February 2020.”

Data from the state Employment Development Department (EDD) tell a slightly different story. In February 2020, according to EDD’s bulletin for that month, 18,756,900 Californians were employed. The bulletin for October 2022 pegged employment at 18,502,900, or 254,000 fewer.

Numbers aside, California’s employment picture has definitely improved from what it was two-plus years ago, when the state’s jobless rate had soared from less that 4% of the labor force to more than 16%. Newsom had ordered widespread shutdowns of business to counter the spread of COVID-19, throwing nearly 3 million Californians out of work.

The financial pain to millions of California families was made immeasurably worse when EDD experienced a bureaucratic meltdown that prevented many jobless workers from collecting unemployment insurance payments, sometimes for months. Moreover, under pressure to clear the backlog, EDD workers then swung too far the other way, authorizing tens of billions of dollars in payments to fraudulent applicants.

Although the October report tells us that almost as many Californians were employed as prior to the COVID-19 recession, the state’s overall job picture is more complex than those simple numbers.

For one thing, the reports for February 2020 and October 2022 reveal that the state’s labor force — the total of Californians either employed or looking for work — has shrunk by nearly a quarter-million persons. The numbers continue a long-term decline in what’s called “labor force participation” — the percentage of working-age adults who have jobs or want to work. They also imply that as the state’s overall population ages, the pool of potential workers is also shrinking.

Whatever the underlying causes, the labor force decline is one reason why California’s employers are having such great difficulty finding enough workers and why they are raising wages — to as much as $18 an hour for fast food workers, for example — to attract more applicants.

“For the past full year and for first time in decades, California has more job openings than job seekers,” a new report from the Public Policy Institute of California notes. “While this is good news for people looking for work, it also limits businesses’ workforce plans and growth — and wage increases have put upward pressure on prices.”

In response, the PPIC report says, some employers are implementing more labor-saving technology, such as ordering kiosks in fast food outlets and GPS-guided machinery in agriculture.

The labor shortage may be having other impacts. The sharp drop in community collage enrollment could, for instance, reflect would-be students’ opting for higher wages in service industries over education.

We may look back on October 2020 as a high point for employment in California because, economists tell us, a recession may be on the horizon. Some employers, especially those in the high-tech industry, are already laying off thousands of workers in anticipation of a downturn.

California has a history of experiencing a recession of some kind about once a decade and we may be due for another.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. For more columns by Walters, go to calmatters.org/commentary.

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