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California's Unemployment Rate Soars, But Worst Yet To Come

Construction crews work on a 24-unit apartment building in North Park, July 23, 2019.
Andrew Bowen
Construction crews work on a 24-unit apartment building in North Park, July 23, 2019.

California lost nearly 100,000 jobs in March, signaling a sudden end to a record 10-year streak of growth because of a coronavirus outbreak that has shuttered nonessential businesses and sent more than 3.1 million residents to the unemployment office.

The unemployment rate in the nation's most populous state is now 5.3%, a 1.4 percentage point increase that is the largest rate increase on record since 1976 when state officials began using the current formula for tracking job losses.

“We are now in a pandemic-induced recession here in the state of California,” Gov. Gavin Newsom said. “These are sober and challenging times.”

Still, the numbers are just a glimpse of the pain people are already suffering. The job losses were based on a survey taken the week that included March 12. That was one day after the NBA suspended its season and Gov. Gavin Newsom banned gatherings of more than 250 people, prompting the closure of Disneyland and other California icons.

Most of the state's job losses occurred after that date, accelerating once Newsom ordered bars and restaurants to close their dining halls and told everyone to stay at home except for buying groceries or other essential tasks.

Michael Bernick, an employment attorney at the law firm Duane Morris and a former director of the state Employment Development Department, said it's very likely California's unemployment rate during the “Great Lockdown” will be well over 12.5% — which is the highest it ever got during the Great Recession last decade.

“These numbers indicate only a small part of the devastation,” Bernick said.

California posted job losses in six of the state's 11 industry sectors. More than 67% of the losses came in the leisure and hospitality industry, which includes restaurants. Other services, which include things like mechanics and salons, lost 15,500 jobs while construction — which state officials had deemed an essential service exempt from the stay-at-home orders —- lost 11,600.

Newsom announced Friday he tapped billionaire businessman and former Democratic presidential candidate Tom Steyer as chief advisor to the governor on business and jobs recovery. He also announced a “Task Force on Business and Jobs Recovery” that includes former Federal Reserve chairwoman Janet Yellen, Disney chairman Bob Iger, Apple CEO Tim Cook and International Longshore Workers Union President Willie Adams, among others.

“We will try to come up with a recovery plan that is worthy of California's past and pushes us to a better future,” Steyer said.

Friday's jobs report from the state Employment Development Department marks the end of a historic run of job growth in the Golden State. Since 2010, California added more than 3.4 million jobs, accounting for 15% of the nation's job growth as it emerged from the Great Recession.

But with remarkable speed, California is now leading in the opposite direction. Its more than 2.7 million unemployment claims since mid-March account for 14% of the nation's total, said Sung Won Sohn, a business economist at Loyola Marymount University.

“Unemployment is in a free fall, and no bottom is yet in sight,” he said.

However, Sohn said there is hope California could be in a better position to weather this downturn because of the state's dominance in the technology industry, which has seen record demand for streaming services and remote work applications.

But others aren't so optimistic. The speed of job losses is unlike anything California — the world's fifth-largest economy — has ever seen. The government will likely lift stay-at-home restrictions gradually, meaning spooked consumers and employers will be slow to re-engage.

“That's what worries me,” Bernick said. “We're going to have to be very innovative on how we get out of this.”