Web Version [link removed] | Update Preferences [link removed] [link removed] California Employment Report for

April 2020

The Center for Jobs and the Economy has released our initial analysis of the April Employment Report from the California Employment Development Department. For additional information and data about the California economy visit www.centerforjobs.org/ca.

While there are continuing technical issues, as described below, with the labor force numbers, BLS analysis of the national data indicates 78% of the unemployed in April were due to temporary layoffs, constituting virtually the entire increase since February. There is still widespread belief that the current extreme downturn is temporary. Most employers expect to resume operation, and most workers expect to be able to return to their jobs.

How quickly these expectations can be realized remains the critical issue. The economic forecast behind the recent Budget May Revise anticipates a very slow recovery akin to what the state recently experienced from the Great Recession. California total personal income is not projected to recover to the 2019 level until 2023. Nonfarm jobs are not expected to recover even within the forecast period, remaining 1.3 million below the 2019 level while unemployment is shown at 12.1% in 2023. This slow recovery is the main driver behind the May Revise deficit estimate of $54 billion and the dramatic cuts among most state services including education.

The effect of accelerated jobs and incomes recovery on state and local revenues is best illustrated by comparing the earlier LAO estimates in their Spring Fiscal Outlook. Even their pessimistic “L-shaped” recession case indicates the deficit and the required cuts could be reduced to $31 billion if recovery is accelerated beyond the slow recovery in the May Revise estimates. Further acceleration as projected under their “U-shaped” recession case would reduce the deficits and cuts further to $18 billion. Painful budgetary cuts, new taxes, and dependence on federal aid are not the only solutions to the current challenges the state faces. Actions to accelerate the current expectations of employers and workers into jobs and incomes can play a much more significant part.

California Unemployment Rate Level 15.5%+ CA Unemployment

Rate

California's reported unemployment rate (seasonally adjusted) in April rose to a series high of 15.5%. The actual number, as discussed below, likely was above 20%.

Total employment dropped 2,432,900 from the revised March numbers, while total unemployment grew by 1,833,200.

The actual level of unemployment, however, was likely substantially higher than the reported numbers. The labor force and jobs numbers are based on surveys done the week of April 12. The UI initial claims data shows substantial continuing increases in unemployment after that date. More importantly, BLS again indicated there were significant COVID-related issues in conducting the surveys for both the labor force and jobs numbers. While the survey response issues fall within acceptable margins, the misclassification rate for unemployed remains high, and no adjustments were made for this factor.

The two most significant misclassification issues, in which survey respondents likely checked the wrong responses:

There was an elevated number of workers indicating they were “employed, but not at work.” BLS analysis indicates most of these responses should instead have been classified as “unemployed on temporary layoff.” BLS also indicates that workers covered under this misclassification likely would have raised the national unemployment level (not seasonally adjusted) by 4.8%. While using one-month of data from the Current Population Survey does not provide sufficient responses for a statistically valid result, using similar analysis for California gives an indication of the likely scale of this effect. Comparing the April numbers to the 2019 averages indicates correct classification would have raised the reported California unemployment rate by 6% to 7%. Persons who do not have a job, are on layoff, but that expect to be recalled to their job are not counted as unemployed or in the labor force because they are not actively looking for work. These workers are instead covered in the response by those who are not in the labor force but who indicate they still want a job. BLS puts the level of this misclassification at up to another 4.4% that should have been shown in the unemployment rate. Again with the same caveats about using one month of data, the same analysis for California shows this factor would have increased the unemployment rate by another 5% to 9%, depending on whether the net increase over 2019 or the total is used. California UI Initial Claims 4.9m CA Initial UI & PUA Claims

Since the Week of March 14

The weekly Unemployment Insurance and Pandemic Unemployment Assistance (PUA—for self employed) initial claims data continues to be an early indicator of the extent of the economic effects from the emergency measures. Through the week of May 16, California’s initial claims rose a combined 4,994,874 since the measures went into effect.

WARN Act Job Stoppages 487k Employees Laid Off

Since March

The California and Federal WARN Acts require certain employers to give a 60-day notice prior to a facility closure or mass layoff. While the Governor has paused the associated penalties for not meeting the requirements, the requirements themselves remain in place. Filings, however, continue to lag the numbers reported in the UI Initial Claims but give an indication of the geographic distribution of the layoffs.

Total number of layoffs reported for March through May 20 was 487,669, with only 7.9% reflecting permanent layoffs or business closures. The three highest counties--Los Angeles, San Diego, and Orange Counties--accounted for 45% of layoffs in the notices.

US Unemployment Rate 14.7% US Unemployment Rate

The reported national numbers show US unemployment rate (seasonally adjusted) jumped to 14.7%, but more likely was significantly higher due to the survey factors discussed above for California. Employment plunged 22,369,000 and unemployment spiked by another 15,938,000.

Nonfarm Jobs Plunge by 2.3 Million 2.3k Nonfarm Jobs Lost

Nonfarm wage and salary jobs dropped 2,344,700 (seasonally adjusted) in April, while jobs nationally were down by 20,537,000. March's losses were revised to 210,500 from the previously reported 89,200. All industries reported losses.

Counties with Double-Digit Unemployment All Counties With Unemployment

Above 10%

All counties had an unemployment rate at 10% or above. The unadjusted rates ranged from 11.1% in Marin to 28.0% in Imperial. Total employment in Los Angeles County dropped to 1986 levels.

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