California’s ‘weak’ job market propped up by public money as private sector sheds jobs

Gains in public-sector and other jobs largely supported by public money have cloaked a dismal California labor market, which has seen a big decline of private-industry jobs since their post-pandemic peak, a new analysis shows.

The state Legislative Analyst’s Office looked at employment data from the U.S. Bureau of Labor Statistics through April, and concluded that private-sector industries in California have lost a total of 340,000 jobs since reaching their peak a couple of years ago. 

The tech and finance industries led those losses. Jobs in the information sector — whose major employers include household names such as Google, Apple, Facebook and Disney — have declined 16% since their peak. There were more than 531,000 such jobs in July 2022, but 98,000 of those have gone away. Employment in the financial sector peaked at 500,000 jobs in December 2021, but it has lost 43,000 jobs, or 8%, since then.

Three other industries each saw a 3% drop in jobs since their peaks: business services, manufacturing, and transportation and warehousing. California has a 5.2% unemployment rate, the highest in the nation for the past four months.

Meanwhile, the health care and social-service industries have gained 240,000 jobs since September 2022, said Chas Alamo, principal fiscal and policy analyst for the Legislative Analyst’s Office, on Monday. Alamo said this industry includes private employers such as dentists, child care providers, vocational-rehabilitation centers and more, but is tightly linked to government spending, so his analysis groups these jobs with public-sector jobs, which have grown by 120,000 over the same period. His analysis was based on 12.5 million jobs in the private sector as of April, and a total of 5.5 million jobs about evenly split between the public and publicly supported sectors.

“The jobs picture since late 2022 has been weak,” Alamo told CalMatters, adding that state monthly jobs numbers should be “viewed with caution” because early revisions show the state did not actually add jobs last year, despite what monthly jobs reports said. Monthly jobs reports are based on surveys of businesses; revisions by federal agencies are based on states’ unemployment insurance data.

California is heavily dependent on revenue from personal income taxes, so the type of jobs that it loses or gains is important. 

Brooke Armour, president of the California Center for Jobs and the Economy, said “all job growth is good.” But she added that “we’re losing high-wage jobs that help fund the (state) budget. We’re gaining hospitality and service jobs, which are low-wage jobs. We’ve hollowed out the middle-class jobs.”

The center is the information arm of the California Business Roundtable, an advocacy group that includes top executives of the state’s major employers. The group’s most recent analysis of employment data echoes Alamo’s assessment of the state’s job market. Though the center’s report mentions the group’s recurring complaints about the high costs of doing business in the state, it chalks up tech’s significant job losses mostly to the industry’s pandemic hiring sprees. 

“What we’re looking at in tech jobs is a correction,” Armour said. 

The center’s report said tech companies continue to prefer to remain in the tech hubs of Silicon Valley and the Bay Area. That is also important to the state’s coffers, which are becoming increasingly dependent on the stock-market performance of the tech industry. 

“But while those tech companies are still here, are they growing here or are they growing elsewhere?” Armour asked. “We see a lot of them making investments outside California.”

As for whether the state’s sizable budget deficit could affect the job growth in public-sector jobs, Alamo of the Legislative Analyst’s Office said the public-sector industry also includes jobs supported by the federal government. And he said jobs in the health care and social-services industries are likely to continue to grow “despite state-budget challenges.”