Recovery underway: employment rises in 2011

Employment rose by 0.5 percentage points from January 2012 to February 2012, to a total of 14,116,400 total people employed statewide. Jobs also increased in four of California’s five largest counties, although Riverside employment saw a slight drop. While these increases are not sufficient to reduce the drop that took place from December 2011 to January 2012, they are nonetheless indicative of a gradually improving jobs market.

One means of assessing the strength of that market is to review the one-year change in employment from January 2011 to January 2012. Employment levels in January are typically at their low point, or baseline, for the year. 157,600 jobs were gained in California between January 2011 and January 2012. A total of 14,019,500 people were employed statewide at the end of January, just over 1% above one year ago. While this one-year increase is sufficient to provide jobs for California’s increasing population (which also grew by about 1% in 2011), it is not nearly enough to make a dent in the vast number of jobs lost since the Great Recession of 2007.

At the present pace of job growth, it would take another eight years just to return to the level of California employment last seen in December of 2007.

January 2012 employment dropped 2%, or 258,300 jobs, from December of 2011. A seasonal fall in employment is typical for January, and does not indicate a reversal of the slow recovery which began in early 2011.

Among California’s largest counties, the most significant one-year rise in employment took place in Riverside, where employment rose by almost 2% from January 2011 to January 2012. Riverside employment was hit especially hard by the financial crisis, and unemployment there remains among the highest in the nation.

Meanwhile, counties like San Diego and San Francisco reported extremely minimal gains in employment over the last year. Los Angeles had gained a significant number of jobs throughout 2011, but lost 84,900 jobs in January, leaving it with only a .2% increase in employment over one year ago.

The unemployment rate in California also saw a drop of almost one percentage point from one year earlier, to 11.3% in January 2012. However, January also saw a one-month rise in the unemployment rate from 10.9% in December. February continued this rise, with unemployment climbing to 11.4%.Unemployment has historically increased early in the year only to drop once again in following months. Current numbers are consistent with the declining trend in unemployment that began in 2010.

The one-year drop in unemployment, which means almost150,000 fewer people are unemployed now than one year ago, is not indicative of improved employment conditions for workers in California. Quite the opposite, in fact; with job creation slow and jobless benefits expiring, the drop in unemployment is offset by a corresponding decline in the labor force participation rate, which also fell by one percentage point in 2011.

These two aspects of employment indicate that approximately 170,000 people simply dropped out of the labor force entirely in 2011. Unable to find work, these individuals have ceased to look for it or, in some instances, have started a business and become self-employed.

For a full jobs recovery in California (and a corresponding increase in home sales volume) employment will need to first increase for about three years at a rate of 400,000 additional jobs annually. As recovery takes a firmer hold, such employment numbers will most likely be seen in 2013-2016.

Recent years have not delivered the jobs necessary for California to quickly achieve employment goals. 2012 will probably get us half way to this annual targeted employment gain, with 200,000 to 250,000 jobs likely to be added to California’s labor force this year.

However, a full jobs recovery is not likely to take place until 2016. January’s employment rate suggests California businesses have modest confidence going forward, but will certainly continue to create jobs as the public earns more (and spends more of its earnings). No additional help is likely from the U.S. government (the “employer of last resort”) or Federal Reserve (the Fed).

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