Jobs, the economy, and the cost of living are top of mind for Californians. Two years ago, California’s labor market started to lag behind the US economy as job growth slowed in California and the number of unemployed Californians started to increase. However, in recent months, jobs and unemployment in the state stayed relatively stable while the national labor market slowed and began to look more like California. In this post, we take a closer look at the sectors driving these dynamics, compare state and national trends, and outline which groups of Californians have been most affected by unemployment.
Overall, California has 2.3% more jobs today than before the pandemic, compared to 4.4% in the US. This gap started to emerge in mid-2022, following a relatively quick recovery from the severe job loss of the pandemic.
Lagging job growth in California is driven by a few sectors:
- Information: This sector, which represents a higher share of jobs in California than in the nation, has 12% fewer jobs today in the state than before the pandemic. Nationwide, the number of jobs stands 3% above pre-pandemic levels. This is primarily driven by shifts in the movie industry, which has struggled to recover after the pandemic and worker strikes in the face of technological change and global competition.
- Professional, scientific, and technical services: This sector also represents a higher share of jobs in California than in the nation and accounts for large discrepancies in job growth between the two. Nationwide, jobs in this sector are 13% above pre-pandemic levels, while jobs in California are only 4% higher. After booming early in the pandemic, this sector, home to many tech firms, has been impacted by layoffs and jobs leaving the state. However, declines sector-wide have abated in 2024 and excitement about generative artificial intelligence could lead to more jobs in the tech sector.
- Finance: Starting in early 2022, the finance sector started to shrink in California, whereas nationwide the sector plateaued. Though this sector is not overrepresented in the state relative to the nation, the differential trend contributed to California’s divergence in job growth. Today, the number of jobs in California is 6% below pre-pandemic levels compared to 3.7% above, nationally. While job losses have tapered off, the trend over the past year does not suggest a near-term recovery in finance jobs.
In contrast, three sectors have helped buoy California’s job market: health care, educational services, and other services (home to auto and personal services businesses). Growth in these sectors has exceeded national growth. As of October 2024, these sectors have 16% (health care), 8% (educational services), and 1.4% (other services) more jobs in California than before the pandemic.
Other sectors have grown at similar rates in California and nationally, including large sectors like government, retail, accommodation and food service, and transportation. Of these, growth in transportation outpaces that of all other sectors, with 15% more jobs than before the pandemic (similar to growth in health care).
With continued job growth in some sectors and slightly improving trends in others, the gap between California and US job growth has started to narrow. Compared to one year ago, jobs have grown at a similar rate here and in the US (1.2% and 1.4%). US growth has been slowing since the beginning of 2024, whereas job growth in California picked up a bit this summer and has since slowed marginally. This rate of job growth is a bit slower than what we would expect based on historical patterns. For example, in the six years before the pandemic, jobs grew in California at an average annual rate of 2.3% (and 1.7% in the US).
Some Californians are struggling more in today’s slightly weaker job market. Unemployment in California started to increase in 2022, ticking up from a low of 3.8% in August 2022 (compared to 3.6% in the US). Today, 5.4% of Californians are unemployed, compared to 4.1% of residents nationwide. California’s unemployment picture worsened more quickly than in the US but in the past year has remained about the same while the US rate worsened. Considering the extreme inflation experienced in the US, which spiked in 2022 and prompted Federal Reserve actions to slow the economy, the increase in California’s unemployment rate is well below expectations.
Unemployment has increased for some groups more than others. This may be related to the slowing economy and shifts in some sectors, like tech layoffs and Hollywood’s reset. Notably, the unemployment rate has recently increased slightly for women. As of last quarter, women’s unemployment rate was nearly identical to men’s even after having been notably lower for almost two years. Latino and Black Californians have the highest unemployment rates across major racial/ethnic groups; the rate among Latinos has increased notably in the past two years. White and Asian Californians have lower unemployment rates, but unemployment of white workers has gone up recently as well.
Younger workers in California have experienced the largest increases in unemployment, to levels higher than before the pandemic (10.3% vs. 6.6% for those 20- to 24-years-old). Californians with lower levels of educational attainment have seen larger increases in unemployment as well. For workers who did not graduate high school, unemployment was at 11.4% in the last quarter, about double the pre-pandemic rate.
Jobs and the economy are not just top issues for the state but also factored strongly in decisions at the ballot box this month. California and the US are in a period of slower job growth and slightly higher unemployment than before the pandemic. There are policy options to maintain or even grow jobs in California, and for quintessentially California sectors like film, the state is considering expanding support. However, it’s critical to dig below statewide statistics and consider nuanced approaches to support prosperity across the state’s varied sectors, communities, and businesses.
