Jobless rate plunges in Sacramento and California

06/22/2013 12:00 AM

06/25/2013 11:29 AM

The unemployment rate in Sacramento and California registered a significant drop in May for the second consecutive month, but analysts cautioned that the steadily improving numbers conceal a large number of people who are working in low-wage jobs or who are no longer firmly attached to the workforce.

Their concerns included job gains attributed to a large number of self-employed people, gains in comparatively low-paying hotel and restaurant jobs and an unknown number of jobless, including college graduates, who are no longer counted because they have stopped searching for employment.

Still, the numbers released Friday were clearly encouraging.

The Sacramento area jobless rate fell to 7.8 percent in May, down from a revised 8.2 percent in April, according to statistics released Friday by the state Employment Development Department.

The statewide jobless rate dipped to 8.6 percent last month, down from 9 percent in April, 9.4 percent in March and 10.7 percent a year earlier.

The May rate was the lowest since November 2008.

"Pretty impressive," said Christopher Thornberg, a founding partner of Beacon Economics. "There's no doubt that there has been a big decline in unemployment that people got jobs."

But Michael Bernick, a former EDD director now with the law firm Sedgwick LLP in San Francisco, was concerned about the relatively modest statewide increase of 10,800 payroll jobs.

"Normally, a gain of 10,800 payroll jobs would not shift the unemployment rate at all," Bernick said of Friday's numbers. Rather than big increases in people going to work for others, he said, the lower unemployment rate reflects "sharp increases in the number of Californians who say they are employed, even though they do not have payroll jobs."

"They are primarily independent contractors," he said. "On the positive side, that could represent a burst of entrepreneurism."

A less encouraging possibility, he said, is that they are "basically people who aren't able to find jobs and are involved in very marginal enterprises economically."

Thornberg added a cautionary note of his own: It's hard to pin down how many Californians left the job-search market long ago, perhaps permanently. He wondered if California's transition to a technology-heavy economy has created a segment of workers "who really don't fit into our economy. It has happened before, in the 1930s and 1970s."

Asked if he thought jobless rates were approaching a level where unemployed people sitting on the sidelines might step up their efforts to find work, Thornberg said: "It's coming, but we're not there yet. Unemployment is still pretty high and much of the labor demand is in the skilled sectors.

"That will change in a couple of years, particularly with construction coming back."

Jeff Michael, a University of the Pacific economist, agreed that there has been a "decline in workforce participation (of) people of working age. Whether that is cyclical or permanent remains to be seen."

Michael said he expects more jobless people to pursue work if unemployment rates continue to fall.

"The market for younger workers has been horrific in recent years, so you may see growing participation in that group," he said.

Another concern was that many of the new jobs are low-paying.

Among the sectors showing the best performance last month was leisure and hospitality, which includes hotels and restaurants. In the Sacramento area, leisure and hospitality recorded its largest April-to-May increase since 1991, with the addition of 700 jobs. Statewide, leisure and hospitality led all segments in monthly gains, adding 9,000 jobs.

California's unemployment rate remains well above the national rate of 7.6 percent and is tied with New Jersey for sixth-highest among the states. Nevada's jobless rate is highest at 9.5 percent.

Call The Bee's Mark Glover, (916) 321-1184.

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