California’s unemployment rate ticked up to 5.3% in February, rising steadily from its 3.8% low in August 2022. Job growth has also slowed, with the state losing 3,400 jobs between January and February. Though unemployment remains low by historical standards, California’s labor market picture has diverged from that of the US: nationwide, jobs have grown at about twice California’s annual rate. US unemployment is also much lower (3.9%) and has held steady for the last two years.

The past four years have been a wild ride on the jobs front. After California peaked at 17.7 million nonfarm jobs in February 2020, the pandemic hit and almost immediately eliminated 14%–16% of jobs in the California and the US. US jobs rebounded more quickly than those in California, but both had recovered to pre-pandemic levels by June 2022. Then job growth began to diverge. Since August 2022, jobs have grown three times faster in the US than in California; employers in California were adding jobs (except for February 2024 which saw job losses), but at a slower pace than nationally.

Slower job growth isn’t great news for the economy overall, but it’s even more concerning when it coincides with rising unemployment. Since August 2022, the number of unemployed Californians has increased by over 300,000—to a total of just over 1 million. The labor force has also grown, but not by as much (240,000).

To understand what’s behind California’s slower job growth, we need to look at how the state’s major sectors are faring. The good news: since August 2022, health care has added 230,000 jobs, the largest number and the fastest pace of growth (9%) of any sector. Government, especially local government, has added 112,000 jobs, while leisure and hospitality added about 71,000 jobs. In all of these areas, California growth is similar to that of the US; in fact, health care jobs grew a bit faster here than in the country as a whole.

On the challenging side: since mid-2022, the information sector has lost about 93,000 jobs in California (a 15% decline), and administrative services has shed 68,000 (or 6%) of its jobs. Although these sectors have lost jobs nationwide, in California they are now operating with far fewer jobs than before the pandemic. The finance sector in California has contracted by 31,000 jobs since August 2022—nationwide, the sector saw only a minimal decline. Lastly, the transportation sector, where strong growth drove the initial jobs recovery from the pandemic, started to shrink in early 2022; this matched the national trend.

The professional and technical services sector, retail, and manufacturing have seen smaller declines (about 18,000 each) since August 2022. Only professional and technical services diverged substantially from that of the nation, which saw steady increases. The construction sector (not shown) has added jobs slowly in California; by contrast, nationwide construction has grown by nearly 5%.

What are the prospects for reversing these adverse trends in California? Some hopeful signs include recent improvements in the worst-performing sectors. In the information sector, motion picture and sound recording businesses drove the major job loss. Although the 2023 screenwriter’s strike worsened this contraction, it began earlier: jobs fell 36% between August 2022 and September 2023, compared to just 10% in the US overall. Since last September, jobs have increased 6%.

In administrative services, job loss was driven by employment services firms that do placement, recruiting, and temporary hiring. Jobs fell 16% in California since August 2022, compared to only 8% in the US. Though California has gained jobs in these firms in recent months, the trend is not yet definitive.

Altogether, there are promising signs that the drivers of California’s divergent—and more negative—job trends may ebb. But even as strong job growth in some sectors has buttressed California’s economy overall, those benefits don’t necessarily spill over to businesses and workers in struggling sectors. Understanding why California diverged from the nation and what the future might hold is essential for targeting the assistance and attention that can give California’s diverse businesses and workers  a chance to thrive.