Report: California recovery lags, labor force participation stagnant

Despite leading the nation in job gains in October, California’s recovery continues to lag as the state’s labor force participation was “little changed” last month, according to a new analysis from the California Center for Jobs & The Economy.

Despite adding 96,800 jobs in October, the center’s analysis found that the state has a “disconnect between the recovery of jobs lost during the pandemic and workers returning to the workforce.”

According to the October Jobs Report released from the Bureau of Labor Statistics, California led the nation in job creation but tied Nevada for the highest unemployment rate at 7.3%. In addition, the labor force participation rate in California dipped one-tenth of a percentage point in October, down to 61%, and remains well below the pre-pandemic level of 62.5%, according to the center’s analysis.

The center’s report also found that the state had about 400,000 job openings in September, about 50% above the 2019 average. But even this high number of openings “is not good enough to overcome the state’s recovery lag,” the report said, indicating that “jobs potential remains higher elsewhere” in states where one or more jobs are available for each unemployed worker. According to the report, there is less than one job opening for each unemployed worker in California.

In addition, the report found that job openings in the state “do not necessarily match up” with the current unemployed population, meaning that the sectors with the greatest pandemic-induced workforce losses have not had the highest job openings, according to the center’s analysis.

The largest number of job openings in September was in Professional & Business Services (17.1%) and Health Care & Social Assistance (16.7%). However, these sectors only accounted for about 12% of total job losses during the initial COVID-19 lockdowns in the state, according to the report.

Meanwhile, job openings in the lower-wage Retail Trade, Leisure & Hospitality and Other Services sectors accounted for a combined 29.6% of the total openings, despite these sectors accounting for 55% of job losses during initial COVID-19 lockdowns.

This disconnect means that while there are openings for job seekers, “the available skill levels among unemployed workers do not necessarily equate with the available job needs,” the report found.

The analysis also asserted that, while California “has the potential to do better” by adding a wider range of employment opportunities beyond higher-wage and tech industry positions, “state policies continue to emphasize growth in social assistance programs rather than reforms to accelerate a wider range of job types.”

These factors are all part of the state’s employment lag, which the center now estimates will delay full recovery until the end of 2023. The analysis said that California will likely remain in recovery mode for the foreseeable future, while many other states are “poised to move into a renewed growth phase.”

The report indicated that prospects for accelerated job gains or “continuance at current levels” remain unclear at this point, noting that supply chain blockages are an ongoing constraint on job growth due to shortages and rising prices.

“While shipping for holiday sales is nearing an end, these blockages will continue to affect the availability of materials, components, and inventory in the months following due to more structural issues related to overall capacity and flexibility within the current system,” the report said. “Barring further actions to deal with these challenges, the system also remains vulnerable to new stoppages due to ongoing COVID risks.”

While last week’s analysis indicates that California remains on a long road to recovery, Gov. Gavin Newsom has touted confidence in California’s economy in recent weeks. In response to the October Jobs Report released earlier this month, the governor called the job growth an “unprecedented achievement” on the state’s recovery path while noting there is more to be done.

“There’s more work to be done, and we’re laser focused on supporting those hardest hit by the pandemic and getting folks back on the job,” the governor said in a statement.