California jobs picture brightens in May; unemployment drops for first time in many months

In a surprisingly strong economic report, California employers stepped up their hiring in May and the statewide unemployment rate dropped for the first time since the summer of 2022, the government reported Friday.

Employers in the state added 43,700 jobs last month across a broad spectrum of industries, breaking from the recent pattern of lagging behind the nation in job creation. In April, the California economy produced only 4,100 jobs.

The state Employment Development Department noted that the May increase in payrolls accounted for 16.1% of the country’s overall gains of 272,000 jobs, exceeding California’s 11% share of employment nationally.

However, manufacturing in California continued to shed jobs, as did the high-paying information sector, which includes the struggling motion picture industry.

Last month California’s unemployment rate edged down to 5.2%, from 5.3% in April, even as the U.S. jobless figure went up a notch in May to 4%. Until last month, the state’s unemployment rate had been gradually rising since reaching a low of 3.8% in August 2022.

In April, California had the highest unemployment rate in the nation, reflecting weakness in some of the state’s leading sectors, including technology, information and professional services.

The improvement in May, though just one month, was a welcome relief to officials after the state’s recent subpar performance and amid signs that the national economy is slowing down. Consumer spending is softening and job openings in California and other states have been shrinking in recent months.

California’s job gains last month continued a pattern of solid growth in health services and at government offices. Leisure and hospitality businesses also added to their payrolls, despite the pressure of higher minimum wages, especially at fast-food restaurants.

Significantly, several sectors that had been weak — professional services, trade and transportation, and financial services — also saw job growth last month.

“Before state government celebrates too widely, it is worth noting a few of the job dynamics not in the state’s press release,” said Michael Bernick, former director of the state EDD.

He noted that California has an outsized number of unemployment claims — almost double the state’s share of the U.S. labor force population. And a large portion of the job gains last month were in industries that offer lower wages and fewer hours.

What’s more, job gains are still coming disproportionately from publicly funded sectors such as healthcare and social assistance as well as government agencies, Bernick said. He and other analysts worry that California’s large budget deficit will spill over to the broader economy in the coming months.