HealthyCal.org

By Steve Levy

California’s unemployment rate is now nearly 3% higher than the national rate. In August 2010 California’s unemployment rate was 12.4% compared to the national 9.6% unemployment rate.

The state’s unemployment was this much above the national rate once before in the early 1990s as a result of the large loss of aerospace jobs. The state’s job losses, then as now, were far larger than the national job losses and the state’s recovery took longer. Moreover, the aerospace job losses were permanent, not cyclical losses. Still by 2000 and for several years thereafter California’s unemployment rate was near the national average.

What are the causes of the current high unemployment rates in California and what does that mean for the near and medium term economic future?

Steep declines in construction spending and jobs are the primary reason why California’s unemployment rate is so much higher than the national rate. From 2005 through 2009, California experienced a 60% decline in construction spending adjusted for inflation, from near $100 billion in 2005 to just under $40 billion in 2009, compared to a 25% decline nationally. And the state saw a decline of 83% from the peak in residential unit permits (209,000 in 2005 down to 36,000 in 2009) compared to a 72% decline in other states.

The state saw massive job losses related to the construction decline—job losses that were larger than experienced nationally—and which explain why the state’s unemployment rate and job losses surged ahead of the national average.

California lost 33% of the state’s construction jobs between December 2007 and December 2009 compared to 24% for the nation. And California experienced larger job losses in construction-related manufacturing and retail trade sectors and well as larger losses in finance and real estate.

California lost nearly 500,000 construction related jobs during the peak jobs recession between December 2007 and December 2009. In addition, the state lost more than 200,000 additional construction related jobs in the months leading up to December 2007 and after December 2009 as the construction recession started before and continued after the main recession ended.

What are the Implications of These Data?

California’s deeper recession was caused primarily by a large cyclical downturn in construction with a contribution also from a large downturn in foreign trade related to the worldwide recession. And the data also provide some information on what did not cause California high unemployment rate—above average manufacturing job losses or a falling share of venture capital funding.

Recent venture capital trends show that California is gaining, not losing a share of national sector activity.

VC funding recovered in the first two quarters of 2010 and the state’s share of U.S. funding reached an all-time high of 52.7%. The state’s manufacturing job losses outside of construction were less than in the nation. So manufacturing did not cause the state’s higher unemployment rate.

The motion picture sector, led by gains in TV and commercial filming, has been outpacing the nation in job growth since the large share losses that occurred ten years ago. The state’s share of national jobs, which has been increasing since 2003, jumped in 2010 partly as a result of the state’s new tax credit.

And trade volumes are increasing throughout California as both exports and imports are growing again as the nation’s trade with Asia is growing.

So, unlike in the aerospace or dot.com recessions, the state’s economic base did not experience any losses that are likely to persist over time.

Still there are Near-Term and Long-Term Economic Challenges

The state is in the beginning of a painfully slow recovery in job levels. It will take 1to 2 years before residents feel like the economy is recovering and another 1 to 2 years before unemployment rates approach even 6 or 7%.

Housing and overall construction spending will only slowly recover. In the 1990s it took almost seven years for housing prices to regain 1990 levels and for construction to pick up appreciably. But housing will eventually recover as the state will add from 400,000 to 500,000 residents per year over the next decade.

The policy and political debate in California should be about the future, not the present or the past. There is little that governors or state legislatures can do to accelerate recovery from recession and their failure to admit the limits of state power simply confuses people and deepens cynicism about government.

States do not have the tools that the federal government has and recent events show the limits even of great federal power over interest rates, taxes and spending in the face of the recession, financial market turmoil and great loss of wealth for many households.

But governors and legislators do have the power to shape the public foundations in California that are critical to attract private investment and job creation. Here the problem is not lack of tools but disagreement over the best way to bring long-term prosperity to California.

Addressing these issues and not pretending to be able to create jobs next year would be a good place for candidates in California to focus. Such a move might restore a measure of truthfulness to public economic and budget debate and help voters better understand the policy choices among candidates and how that will affect them and the state.

Steve Levy is director of the Center for the Continuing Study of the California Economy.

By Michael Bernick

The number of unemployed in California, the rate of unemployment, the average duration of employment: all of these indicators have risen dramatically since 2007. However, there is a less-known job indicator that also has risen dramatically and may have more to do with stalling a job recovery in California than any other: the number of workers involuntarily working part-time.

The table below shows the explosion of involuntary part-time employment in California since summer 2007. It was compiled from data provided by economist Paul Wessen of EDD’s Labor Market Information Division.

Californians Who Work Part-Time But Seek Full Time Work (April 2005-April 2010)

Month/Year Californians Involuntarily Working Part-Time
April 2005    644,000
April 2006    615,000
April 2007    597,000
April 2008    745,000
April 2009    1,191,000
April 2010    1,543,000

As economist Wessen explains, the numbers are part of the Current Population Survey of Households data. Included are workers who work less than 35 hours a week, often considerably less than 35 hours a week, and would prefer to work full-time.

These numbers do not include workers who work less than 35 hours,and prefer to do so. This latter group (students, workers with family responsibilities, workers who choose part-time work as a life-style) is also tracked in the Households Survey, and, in fact, is a larger group, usually double the size of the involuntary part-time employed.

The involuntary part-time employment, though, is of greater concern to policymakers, both for its direct impacts on family income and its impact in slowing California’s job recovery. The most recent monthly state employment numbers released last Friday for April 2010, show California lagging in job creation behind the national rate and behind the rate of other states. The California economy created a net of 14,200 payroll jobs in April 2010, well below such states as Ohio (37,300 jobs), Pennsylvania (34,000 jobs), and New York (32,700 jobs).

As the economy improves in California, many employers will increase the hours of current employees working part-time rather than go out and hire new employees. This makes sense on economic and moral grounds. However, given the large pool of involuntary part-time workers in California, it is one more reason that the job recovery in this state likely will continue its slow pace in 2010.

Michael Bernick is the former director of the state Employment Development Department. This article first appeared on FoxandHoundsdaily.com.

By Hilary Abramson

Six people seated at a bank of phones against a wall repeat their Social Security numbers into receivers. Some whisper behind cupped hands. Some use their normal voices, making eavesdropping at your nearest unemployment office easier than stealing mail for identity theft.

If you’ve already filed a claim and have a question unanswered online, the fastest solution, you hope, may be to show up at your local office. But be prepared to go over to that bank of phones to call the unemployment office from … within the unemployment office.

It’s like when you go to your bank to cash a check; ask about your credit card, and the teller directs you to a phone inside the bank … so you can call the bank. You’ve already forgotten that the bank’s greeter offered you coffee and stale cookies.

To save money, the state Employment Development Department (EDD) did away with walk-in service, where you could meet with specialists, a decade ago. EDD workers answer phones from eight or nine centers around the state. Last year, the department reports receiving more than 250 million calls, many through the automatic “redial” feature on home telephones.

At the central EDD office off Broadway in Sacramento, phones connecting to the 800 numbers are in a room with rows of chairs. There is only one woman behind the counter, who directs you to the phone room or to an adjoining area, where you can communicate with EDD via computers. You notice that when one person hangs up a receiver, the next seated person stands, and you move one seat. If the progression falters, a male guard appears to remind you.

Today, it takes about two-and-a-half hours to advance to a phone. You will have the information you came for an hour after that.

Meanwhile, you try to comfort a middle-aged man who is sliding from chair to chair with you, his head hung forward.

“How long have you been here?” you ask.
“Three hours…My company president was a pill popper and messed up our unemployment. I haven’t had any money for seven months.”

How does he live?

“Crying, talking to myself, going out of my mind….”

His voice starts to quiver and rise just as a phone becomes available.

The man to his left on the line of phones throws his baseball hat backwards and buries his head in his arm. “I was on for an hour and the phone line disconnected,” he says, moaning into his sleeve.

Behind, a young man in a slouch holds his stomach. He missed breakfast and lunch and it’s 2 p.m. “I’m starving, but afraid to leave the line,” he confides.

A woman with magenta hair and freckles turns around and shoves her purse toward him. She points and mouths the word, “F-I-S-H.”

He digs his hand inside and comes up with cheesy, orange crackers. Crumbs flaking around his lips, he mouths, “THANK YOU!” and licks his fingers.

A voice over the public address system announces that when you pick up the phone, an automated voice may say, “Welcome.” If that happens, dial extension 104. If the line is busy, hang up and try again. It could take multiple attempts to get another message urging you to hold on—“it could be about seven minutes.”

Beside you, the man with the druggie former boss is now standing and yelling into the phone: “Because he loused up and you loused up, I’ve lost my house, car, girlfriend, and now I’m homeless. I know it sounds like a country song, but it’s my life. WHAT ARE YOU GOING TO DO ABOUT IT?”

As he slams down the phone and runs out of the room, your dial tone finally segues into a far-away voice. “Hello?” says your operator. “How can I help you?”

This is the beginning, middle and end of your conversation. She warns that if you answer differently from the written responses submitted on your original unemployment application, there will be legal consequences.

You start stammering, trying to remember. This is your first time at an EDD office. You came because you gave up trying to get through to the 800 number from home and your cell phone. You thought you could discuss a confusing letter you received from EDD in person.

The operator’s voice jolts you.

Yes, you get a small pension. What date did it start? What date did you write down? Do you have your former employer’s zip code with you?

Her voice is terse. You said too much. You must answer with yes or no or the information. One word beyond what she expects means she has to start from the beginning.

Are you a member of a union? Are you a U.S. citizen or national? Are you disabled? What was your former employer’s name? Spell it.

Spell it.

Spell it again.

Spell it again.

She is trying to help you.

Spell it.

Why were you laid off?

What is the name of your last employer? Spell it.

Spell it again.

Do you expect to return to work for this employer?

What is your former employer’s name?

Spell it.

She will let you know when you can ask your question.

Going off-script does not work with at least one out of 10 unemployed Californians with no one to help them face-to-face. Like them, you are hardly surprised when two weeks later, a letter from EDD arrives instructing you to wait on a specific date by your home phone from 9 a.m. till noon for an interview. On the appointed day, you wait, but the phone fails to ring. You send EDD an email from its website, stating that you need another appointment asap.

Three days later, you receive five letters from EDD stating that you failed to answer when an agent called. But the phone number listed as the one EDD called is not yours. EDD has made a determination without speaking with you: You are no longer eligible for unemployment.

If you have a problem with this, you can appeal.

Hilary Abramson is a veteran California journalist who has been laid off twice in the past six years.