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California’s unemployment rate dipped slightly to 5.2%, yet it remained the highest among all states for the 4th consecutive month. Despite marginal improvements in job numbers, employment levels still lagged pre-pandemic benchmarks, with recovery rates ranking among the lowest nationwide. A report from Beacon Economics attributes this trend to significant minimum wage hikes, particularly affecting youth employment and potentially widening income inequality in the long term.
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Nonfarm jobs saw improved gains in May, marking the strongest increase since October. Despite this progress, the state ranks 4th in job recovery since pre-pandemic levels. However, upcoming revisions based on QCEW data suggest California's job performance may be downgraded, potentially impacting its overall standing among states in job creation.
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Job market dynamics show growth driven primarily by government and healthcare/social assistance sectors, which together accounted for nearly all reported job gains from May 2023 to May 2024. This growth is largely fueled by government spending, reflecting a dependence on public funding amidst broader economic challenges. Other private sector jobs showed no significant change due to rising costs and regulatory pressures.
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The April JOLTS data indicates potential future weaknesses in job growth in California where unfilled job openings have dropped to 2016 levels. This contrasts with the broader US trend, where job openings remain above pre-pandemic levels.
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California's UI Fund sinks further through multi-year deficits. The state, accounting for over 20% of initial claims and insured unemployed nationwide, projects substantial current year deficits for at least the next two years, shifting the federal tax increase from debt repayment to supporting the state's current operating practices for the program.
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