California Creates Jobs in May; the economy is showing signs of weakness
California released another strong jobs report on Friday as the jobless rate fell to its lowest level since before the pandemic; but the news was overshadowed this week by the surer signs of a faltering economy that could soon usher in a recession.
Employers added 42,900 new jobs in May, bringing the unemployment rate down to 4.3%. It is the lowest rate since the 4.1% reached in February 2020, just before the country’s most populous state closed many businesses due to the coronavirus and lost more than 2.7 million. jobs.
California has now recovered 93% of the jobs it lost at the start of the pandemic, according to the Department of Employment Development. But the news was tempered by other signs of unrest this week as inflation has reached its highest level in 40 yearsStock prices have fallen and the Federal Reserve imposed the biggest rising interest rates in nearly three decades.
California’s economy will likely be hit harder than other states by these developments, given the state’s reliance on real estate and capital gains income — money from the sale of various assets, including actions.
“I think from now on things will get worse, not better,” said Sung Won Sohn, an economics professor at Loyola Marymount University.
The Federal Reserve on Wednesday raised the interest rate for banks when they lend money to other banks. This rate affects other interest rates throughout the economy, including mortgage rates.
As the median home price in California set another record in May at $898,980, the average monthly interest rate on a 30-year fixed mortgage exceeded 5% for the first time since April 2010. The result was that 9.8% fewer homes were sold in May compared to April, down 15.2% from a year ago. This is the lowest level of sales since June 2020, according to the California Association of Realtors.
“We’re starting to see signs of a more balanced housing market with fewer homes selling above list price and homes staying on the market a bit longer than in previous months,” the California president said. Association of Realtors, Otto Catrina.
Nationally, prices for food, gasoline and other goods jumped 8.6% in May, the highest since 1981. California retailers, particularly general merchandise stores, have lost 3,700 jobs in May, the most of any industry – a sign that consumer demand may be slowing.
“My advice to job seekers or anyone who might still be on the sidelines or looking for a job: Now is the time to try to get back. It’s going to get harder,” said Michael Bernick, research director for the California Workforce Association. and an attorney from the Duane Morris law firm.
Rachel Michelin, president and CEO of the California Retailers Association, said retailers are still seeing strong sales — it’s just that more of those sales are happening online rather than in-store. She said retailers were still struggling to hire workers, suggesting the May layoffs could be the result of business owners adjusting to labor shortages by doing things like the installation of more self-service payment stations.
But she said retailers were watching inflation closely, noting that many were still struggling with supply chain issues.
“As of today, I would say we’re not as concerned about retail sales in general,” Michelin said. “But I think when you watch some of the big national retailers lower their expectations, we’re setting ourselves up for an economic downturn, which will obviously lead to even more retail job losses.”
Governor Gavin Newsom signed a $5.5 billion tax cut for most businesses earlier this year. On Friday, he announced $178.2 million in tax credits for 16 companies that together have pledged to create 7,600 new jobs and $2 billion in private investment. The tax credits are known as the California Competes program, which was created in 2013 to convince businesses to stay in California.
“Investing in innovation works, and no place does it better than California,” Newsom said in a press release.
The Office of the Nonpartisan Legislative Analyst has questioned the effectiveness of the California Competes program, saying the program’s success is difficult to measure.