Despite signs of strength in California’s economy, unemployment has ticked up, including a surprising drop in employment among men and new patterns across age groups. This uptick may be due to the Fed’s actions to slow the economy to temper ongoing inflation, which often coincides with a rise in unemployment and with recession. While recession does not seem imminent, the rise in unemployment might signal areas of concern for the state’s economy, and challenges for those impacted.

California’s unemployment rate is the third highest in the nation: as of July, 4.6% of California’s labor force is unemployed—or about 885,000 residents. That rate reflects a steady climb over the past year and brings California above the US rate (3.5%). While it is typical for the California rate to be higher than the US rate—historically driven by the state’s younger and faster growing workforce—the unemployment picture remains substantially better than at almost any point in the past 40 years. Aside from the recent low in 2022 and in the two years before the pandemic, unemployment has not been as low as it is today since 1976.

Unemployment is a function of who participates in the labor market—those who’ve opted out of looking for work are not counted. These discouraged workers can artificially reduce the unemployment rate, making things look better in the labor market than they actually are. While discouraged workers were a factor in recent years, they are less so today: the same share of the population is participating in the labor market in July as pre-pandemic (62.4% of the population age 16 and over in July 2023 and July 2019).

Although the state has added jobs consistently over the past year, we’ve also added 152,000 Californians to the unemployment rolls; that is, 21% more residents are unemployed than a year ago (in part reflecting increased participation in the labor force). Unemployment tends to be higher for those with less education, for Black and Latino workers, and for younger workers. Furthermore, a higher share of men are unemployed than women.

Workers with less than a high school diploma saw the largest rise in unemployment, followed by Black and “other" workers (because our data sample is small, we combine smaller race/ethnic groups). Workers with some college education but no degree also saw a significant increase in unemployment—and their rate today is much higher than pre-pandemic.

While younger workers tend to have higher unemployment rates than other age groups, the largest rise in unemployment over the past year occurred for 25–44 year olds. Their rates are higher today than before the pandemic. Balancing that out are older workers; the unemployment rate for those 55 and older has declined and is substantially below 2019 rates.

For men, unemployment has increased more than for most other demographic groups and much more than for women—the change for women was slight in the past year and is only 0.2 points behind what it was pre-pandemic. While the jobless rate for women spiked higher than for men amid the pandemic, recovery for women has been stronger than for men—but it is unclear why.

Overall, the past year has changed little about who is unemployed in the state. As long as the state continues to add jobs, ensuring everyone can access job opportunities will be key. Knowing where jobs are growing, how to find jobs and obtain the skills and experience for them, and how to address barriers that constrain employment are questions job seekers, employers, and policymakers alike must address.