Good News on the California Economy
Information released today shows that the state’s economy in 2013 was stronger than we thought. According to revised data, California’s economy created 447,400 jobs during 2013, on an annual average basis. This is about 200,000 more jobs than the government initially reported. (Previous estimates understated this number because some jobs were erroneously excluded and because of errors inherent in sampling methodology.)
How are these numbers generated? On a monthly basis, a survey of employers helps to estimate payroll employment for California’s “nonfarm” workers (which excludes proprietors, the self-employed, unpaid family workers, farm workers, domestic workers in private households, and uniformed members of the armed services). In March of each year, these initial estimates are reconciled to actual counts of employment derived from unemployment insurance tax records, and revised estimates are released.
The effect of these revisions on the underlying employment trend is significant, with California adding jobs at an average annual rate of 3.0 percent during 2013. This is nearly double the rate that the government had previously reported (1.7%), and is significantly higher than the national rate. In fact, starting in the last quarter of 2012, California’s employment has grown at an annual rate that is 1.4 percentage points higher, on average, than the national rate. We have not seen a California-U.S. job growth gap of this order since 2009—and this time around, California is outpacing the nation. Relative to other states, the state’s job growth ranked third in 2013, surpassed only by North Dakota and Utah.
Job growth has been revised upward in most industry sectors. Traditionally, the revision process most impacts those industries experiencing unexpected growth. In 2013, those industries included health care, management, and construction. Jobs in health care and management grew 4.9 and 3.2 percentage points faster, respectively, than originally estimated. Previous estimates had not pegged either of these industries with the fastest job growth. Construction jobs grew at an average annual rate of 8 percent during 2013 (2.7 percentage points up from the initial estimate), which points toward a housing recovery that’s even stronger than expected.
In contrast, jobs in the arts, entertainment, and recreation sector grew at a slower pace than previously reported (3.7% instead of 5.5%). But even so, annual average job growth in this sector remained among the highest. The revised data also revealed that government hiring finally picked up in the last five months of the year—adding on average 25,800 jobs more than previously reported, a reversal of the trend reported in the initial estimates.
Upward revisions pushed job growth higher throughout the state. For example, in 2013 the Los Angeles-Long Beach-Santa Ana metro area is now reported to have created 50,900 more jobs than previously thought, for a total of almost 143,000 jobs created. Likewise, the San Francisco-Oakland-Fremont and the Riverside-San Bernardino-Ontario metro areas created 42,400 and 33,600 more jobs, respectively, than originally reported. This means that employment in these two metro areas grew at an annual rate of 4 percent.
Before the revisions, the state government projected that California would continue to add jobs this year at an annual rate of about 2 percent (around 340,000 jobs). In light of 2013’s stronger-than-expected job growth, we are anticipating an upward revision on job growth projections for 2014, too.