Beacon Employment Report

Welcome to the Beacon Employment Report, a unique analysis of California’s employment numbers and trends. Each month, we link our own econometric predictions to data released by the U.S. Bureau of Labor Statistics and the California Employment Development Department to identify important changes in employment across industries and regions. The Beacon Employment Report is also one of the few analyses that uses seasonally adjusted numbers, which are critical to revealing accurate trends and insights within data. The analysis is a sample of the kind of research available from Beacon Economics.

Although local officials, and the general public continue to grapple with how to appropriately respond to the COVID-19 pandemic, the labor market in California showed signs of life in May, according to an analysis released jointly by Beacon Economics and the UCR School of Business Center for Economic Forecasting and Development.

Following the loss of 2.4 million jobs in April, total nonfarm employment in the state expanded by 141,600 positions in the latest numbers. Given this modest rebound, the unemployment rate in the state remained stubbornly high at 16.3% in May, down from 16.4% in April.

“The folks out there calling for a long, protracted U-shaped recovery, believe the damage from the closures has been so profound that the economy won’t be able to grow even after mandates are lifted,” said Christopher Thornberg, Founding Partner of Beacon Economics and Director of the UCR Center for Forecasting. “It’s true the May data represent only a small uptick, but there was a bounce in employment while the economy was still closed.”

Thornberg acknowledges that until the June and July numbers are available – the ones that will reflect what has happened after the reopening of economic activity – the pace back to normality will not be truly understood.

Year-over-year employment growth in California stands at -13.0%, the second largest annual decline on record, only trumped by last month’s figures. The state performed slightly worse than the national economy, where nonfarm employment declined by 11.7% over the same period. April’s numbers were also revised downward, with total nonfarm employment in April 70,300 lower than original estimates had suggested, offsetting some of the impact of the gains seen in May.

As mentioned in last month’s Beacon Employment Report, around 75% of workers who have been laid off in the state report that they are temporarily unemployed, and the hope is that many will return to their prior jobs as communities across the state begin to re-open. That said, many of these workers have been unemployed for close to three months. From May 2019 to May 2020, 2.2 million workers were added to the state’s unemployment ranks. In May, the number of unemployed workers in California stood at 3,018,200, over three and half times the level seen one year earlier. The magnitude of the job losses, and the high unemployment rate, suggest that the damage caused to the state’s labor market will take some time to repair, but the pace is uncertain.

In addition, there were over 1 million fewer workers in the state’s labor force in May than there were in February 2020. In other words, 1 million residents who were either employed or looking for work in February have stopped searching for employment. Labor force participation is usually seen as important sign of economic vitality, as an expanding economy usually draws workers into the labor force.

The state’s economy has fared worse than the national economy with the national unemployment rate at 13.3% compared to 16.3% in California. This could be due to the fact that some states re-opened their economies quicker than California. It could also be that the state’s residents are acting more cautiously than people in other parts of the nation and have been more reluctant to resume normal daily activities.