Business Update with Mark Lacter

California's job creation in May stronger than U.S. as a whole

KPCC's business analyst Mark Lacter explains why California's job picture last month was better than any other state in the country.

Steve Julian: Mark, why did California add so many jobs in May and the U.S. so few?

Mark Lacter: All economies are local, Steve, which means that what's going on in Illinois or Florida is going to be different than what's going on in California. Last month, you had nearly 34,000 jobs added to the rolls in May - that's more than any state in the nation. L.A. County alone picked up almost 12,000 jobs, which is a lot - and that even included some modest gains in construction and manufacturing. Actually, the employment report would have looked even better were it not for the number of state and local government jobs that have been lost.

Julian: Can you put your finger on why California did so much better than the U.S. as a whole?

Lacter: Well, several of the industries did especially well - leisure and hospitality, technology, the entertainment business - they all have a strong presence in California. Also, the state could be in kind of a catch-up mode from earlier in the year when the rest of the nation had been creating so many more jobs. It also could be just one of those fluky months. What does bear mentioning - and what's been hardly noticed by many analysts - is that job growth in the state has outpaced the nation over the past year.

Julian: I see the unemployment rate also fell in May.

Lacter: Just a smidgeon to 10.8 percent in May, which is still the third-highest jobless rate in the country. But as we’ve talked about before, Steve, this can be a misleading number considering that some portions of the state - especially in the Bay Area and sections of Southern California - are doing quite a bit better than that 10.8 percent. San Francisco, for example, is at 7 percent, and Orange County is at 7.5 percent. (Some areas are doing quite a bit worse, including L.A. County.) So, what we're seeing are lots of mixed signals, which is obviously not reflective of an economy in full growth mode. But it's important not to jump to conclusions about how good or how bad the economy is going because it often comes down to where you happen to live or work.

Julian: Seems like these inconsistencies are coming up a lot.

Lacter: They really are. You know, Chapman University did a survey that found consumer sentiment in California to be at its highest level since the first quarter of 2007 - that's before the recession. The survey found people planning to buy cars, appliances - all sorts of big-ticket purchases. Then you have a nationwide survey that was taken in early June, and found consumer sentiment taking a big drop. The index used in that survey is at a 6-month low. What's weird is that both surveys might be right - a lot depends on the questions and the context. Gas prices in the L.A. area were way high last month, and now they're running under $4 a gallon. So, folks are probably feeling better about that. The stock market had a good April, and then a disastrous May. They can't be happy about that. June has been all over the place.

Julian: I feel like I'm watching the French Open.

Lacter: Well, consumer attitudes can change very quickly, depending on what the current snapshot happens to be - and that's not the kind of environment business owners like to see.

Julian: They want stability, they want predictability, right?

Lacter: That’s right. Otherwise, why would you run the risk of expanding your business by hiring new workers? And this is part of the problem: people get worried these days as almost a reflex action. Now, there was an encouraging sign in May with a big increase in housing sales for Southern California. It wasn't just the sales - it was the fact that many of the transactions were priced between $300,000 and $800,000, a range that’s been practically on life support going back to when the economy took a nose dive.

Julian: The wind has shifted?

Lacter: Perhaps a change in attitudes - the idea that they’ll be getting a good deal on their next house purchase, and - of course - interest rates are very low. If this attitude change continues - and that's a big if given the concerns in Europe - it could be a very big deal.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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