California’s Remarkable Unemployment Level

December 17, 2012 by Douglas A. McIntyre

The governors of the Federal Reserve may believe that a 6.5% national unemployment level is within sight as the current national level has dropped below 8%. But the situation in some states is nearly as hopeful. Joblessness remains above 10% in Nevada, Rhode Island and California. Given California’s population, the effects of its employment problem are outsized and more difficult to solve than those of the other two states.

Rhode Island’s unemployment rate is 10.4%. The number for Nevada is 11.5%. California’s is 10.1%. But Nevada’s total population is only 2.7 million, and Rhode Island’s is below 1.1 million. California’s is 37.7 million, the largest of all the states.

Rhode Island’s jobs problem may not be fixed easily. Its industrial base largely has disappeared. The state’s largest employers are governments and nonprofits. Austerity programs may keep the jobless rate high for some time, but an improvement in those two sectors of the economy would turn Rhode Island’s problem around.

Nevada’s jobless problem, the greatest in the country for some time, based on the portion of the workforce out of work, has been caused primarily by a collapse in the casino and real estate businesses. But the gambling industry has begun to rebound with the national economy. So the number of jobs in Las Vegas certainly will grow.

Despite a high level of job creation in Silicon Valley, California’s economy is too diverse for the revival of one or two sectors to help the unemployment rate. A drop in jobs in the central part of the state, well inland from the Pacific, has triggered many of the state’s problems. Many of these jobs are low-wage positions in agriculture. Migrant workers have taken some of these positions. But government is also a huge employer in the state, and government spending has been slashed due to California’s huge debt. The collapse of real estate markets has decimated the construction industry. The financial services sector has been under pressure as banks have cut staffs in the face of falling revenue and profits. Defense employment has been hurt by federal “downsizing” in that sector.

California’s jobless problems are so complex that they have no ready solutions. And the federal and state governments have not offered any. Because of these problems and the lack of aid, California’s jobless rate probably will remain near 10% for some time.

Douglas A. McIntyre