In California, Jobless Rate Soars to 9.8%

Providing strong new evidence that California’s stubborn recession will linger well into 1993, the state’s unemployment rate jumped nearly a full percentage point in August to 9.8%, the highest level in more than nine years, the Labor Department reported Friday.

At the same time, new state figures showed dramatic job losses in August, particularly in the key manufacturing sector. The Employment Development Department survey of employers showed a decline of 34,000 non-agriculture jobs in August, consistent with job losses in what has become the state’s worst downturn since the Great Depression.

And in more bad news for California, the new U.S. employment figures suggest that the national economy is worse off than expected. The Labor Department said that employers slashed 83,000 jobs nationwide in August, leading some economists to talk anew about a so-called triple-dip recession.

Many economists believe California’s best hope for recovery is a robust rebound on the national level.

“We were hoping that employment would be stabilizing before long, but it appears we still have further cuts to go,” said Pauline Sweezey, chief economist at the California Department of Finance.

Added Robert Brusca, chief economist at Nikko Securities Co. International Inc. in New York: “This recovery looks like one that was just dug up from the ‘Pet Sematary.’ It’s coming back, but it’s nothing like it used to be.”

The state’s unemployment rate rose from 8.9% in July to its highest level since June, 1983, when the rate was 10.3%.

In Los Angeles County, the unemployment rate fell to 10.7% in August, down from the 11.2% in July, which was the highest in nine years. The volatile indicator registered the second-highest monthly jobless rate for the county since 1983.

Sweezey cautioned that a single month’s unemployment rate should not be given too much weight, since such rates vary widely. Nevertheless, she called the statewide increase “a disturbing indicator.”

David Hensley, director of the UCLA Business Forecasting Project, predicted that California’s jobless rate will probably climb even higher, to more than 11% next year.

The state job figures also illustrate the disturbing trend toward “de-employment,” workers losing higher-paying jobs in manufacturing and goods-producing industries--hurt by defense cutbacks and the collapse of the real estate market--and working at far lower wages in service industries.

As in the recent past, in August the state showed the biggest job decline in manufacturing, which lost 14,500 jobs. Employment declined by another 11,000 in retailing, 4,600 in local government and 4,500 in construction.

By contrast, jobs were up in the service industries, particularly health care, and in motion pictures and business services--sectors economists have long believed are poised for growth.

It’s unclear how much the wrenching employment decline is attributable to the recession, and how much to permanent structural changes in the economy, including increased productivity and the trend by companies to shrink their operations.

“The mistake is for people to think we’re losing our manufacturing base,” said Robert Arnold, senior economist and co-founder of the Center for Continuing Study of the California Economy in Palo Alto.

Business leaders have argued that the state’s regulatory regime, high taxes and high workers compensation costs are driving industry out of the state, accounting for the job losses. A recent study by the state Department of Finance found that more Americans left California than arrived last year, reversing a 20-year trend.

The most recent argument comes in an analysis sponsored by the California Business Roundtable, made up of 75 major corporations in the state. The analysis, prepared by the Boston Consulting Group, calls for greater public and private support for education and investment, lower taxes, lower labor costs and less regulation.

But economists such as Arnold argue that it’s a mistake to think that job losses in the state are because of regional problems.

“The real problem with California is the national recession, not some crisis here,” he said. The state has lost a disproportionate share of manufacturing jobs for the simple reason it had a disproportionate share of them to begin with, he argued.

Moreover, the state’s higher unemployment rate can be explained by the fact that California has a faster growing labor force than the rest of the nation, he said.

Nationally, the economic recovery has experienced two false starts since the recession began in 1990. Some economists fear that Friday’s employment figures could signal a third relapse.

In California, about 400,000 jobs have been lost from the peak in 1990, said Goetz Wolff, a Los Angeles labor market economist. He added that further job cuts can be expected, particularly with the austerity budget just signed by Gov. Pete Wilson this week, which promises to slash public sector employment at state and local levels.

UCLA’s Hensley has predicted that budget cuts will mean the elimination of more than 40,000 state and local government jobs by the end of next year.

Hensley also said that perhaps 30,000 more jobs will be lost in the state’s crucial aerospace industry during that period.

Jay D. Horowitz, a labor market analyst with the Employment Development Department, said that the local aerospace industry continues to wind down. But while many of those aerospace jobs never will return, he said, other hard-hit industries in the area, such as retailing and real estate, should eventually recover.

“We’ve been in dire straits before, and things do come back,” Horowitz said. “The big question is when.”

Ultimately, however, the shakeout could prove beneficial to California when it finally emerges from its black hole.

“One of the most important structural changes occurring here and nationally is that companies are downsizing,” said Lynn Reaser, chief economist at First Interstate Bancorp in Los Angeles. “That has a negative impact on employment, but a positive impact on competitiveness and profitability and hopefully will lay the ground for better performance in 1993.”

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Jobless Rates

Here are U.S. and California unemployment rates, in percentages, over the last 12 months:

U.S. Calif. Aug. ’92 7.6 9.8 July 7.7 8.9 June 7.8 9.5 May 7.5 8.7 April 7.1 8.0 March 7.2 8.5 Feb. 7.2 8.7 Jan. 7.0 8.1 Dec., ’91 7.0 7.7 Nov. 6.8 7.4 Oct. 6.8 7.8 Sept. 6.7 7.7

Times staff writer Stuart Silverstein contributed to this story.