To be sure, since 1970 state unemployment has soared near or over double digits several times, and each time the economy came back. In the early 1980s, amid a downturn in heavy manufacturing, state unemployment reached 11 percent in February 1983, only to come back down to near 8 percent within a year. In 1993, with major cuts in defense and aerospace jobs, state unemployment reached 9.9 percent in January, but the figure came down to near 8 percent by November 1994.
During those recessions, unemployment seemed endless, but employer and consumer confidence returned, and hiring commenced in significant numbers.
The current California recession differs from those in the past in at least two major ways.
One is its severity. The 12.2 percent rate (affecting more than 2.2 million workers) is not only the highest, but it does not cover the roughly 1.3 percent of the California workforce (more than 200,000 workers) classified as discouraged workers or marginally attached or the roughly 5.8 percent (nearly 1 million workers) employed less than full time for economic reasons.
Second, this recession is across all sectors and occupations. The Employment Development Department divides California employment into 11 nonagricultural sectors, and with the exception of educational and health services, all sectors have been job losers over the year. The construction sector in California is the biggest loser and continues to be in free-fall, losing more than 140,000 jobs over the year (18.5 percent of the total) and over 300,000 jobs since December 2006. Business and professional services (loss of 133,000 jobs over the year, 5.9 percent), and trade, transportation and utilities (loss of 191,000 jobs, 6.7 percent) also have seen dramatic cutbacks.
What of the future? The conventional wisdom among economists for some months has been that unemployment will not be reduced significantly until 2010 or even early 2011. Forecasts this summer by UCLA’s Anderson School and the Federal Reserve Bank of San Francisco predicted that unemployment would remain above 10 percent in California through 2010 and perhaps 2011. In September, the Anderson School updated its forecast to predict double-digit unemployment at least through 2011.
It is difficult to predict employment numbers – neither the Anderson School nor most other California economists predicted the speed of the employment downturn in 2008. But there are few signs of a resurgence in hiring. While the enormous job-shedding of late 2008 and early 2009 has abated, employers have been cautious about hiring.
Whenever hiring begins, the job structure will look different. The twin forces of technology and globalization continue to change the structure of jobs in the state, for example in retail employment. Retail in California has lost 110,000 jobs over the past year, and many of these in auto dealerships, electronic stores, apparel stores and other retail outlets are not coming back. As sales move to the Internet, these retailers have fewer needs for both real estate and employees. Similarly, new technologies and outsourcing are reducing the needs for workers in financial services, even book publishing, where Quicken is replacing accountants, TextEdit replacing researchers andBookScan replacing sales analysts.
Beyond these structural changes is the breakdown of the employer-employee relationship and the enormous growth in California of workers who are employed by professional employer organizations and staffing companies and as independent contractors. This growth started well before the current recession, but the recession’s severity and accompanying employer trauma might well accelerate this growth into the future.
Will there be enough jobs in the future of California?
Fear of permanent high unemployment in California because of technology and new ways of working has been present for more than 40 years. In the 1960s , state officials worried that automation was eliminating jobs, especially in manufacturing, and that the state would have unemployment greater than 20 percent on a permanent basis. Of course, automation did eliminate jobs, but new industries and jobs, including new forms of manufacturing, emerged.
I started in the job-training world in 1979 as a volunteer with the San Francisco Renaissance Job Center and went to work full time in 1982. One of our first training programs was in business-machine repair, which meant mainly typewriter repair. We trained workers for the typewriter repair shops that dotted the South of Market area in storefronts on Howard and Folsom streets.
Today, all of those shops are long gone. But in their storefronts, other businesses, not envisioned in 1982, have arisen. They are creating jobs in Web design, software engineering, online education.
A next wave of job creation, fueled by California’s entrepreneurial ethos, must be our hope as we try to survive the current turmoil.
For more, visit the Fox & Hounds Daily Web site. Michael Bernick is the former California Employment Development Department Director and Milken Institute Fellow.