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

for May 2020

The Center for Jobs and the Economy has released our initial analysis of the May Employment Report from the California Employment Development Department. For additional information and data about the California economy visit [[link removed]].

While there are continuing technical issues, as described below, with the labor force numbers, BLS analysis of the national data indicates 73% of the unemployed in May were due to temporary layoffs. While this number is beginning to soften as in other data, it is an indication that the current downturn has the potential to remain limited with a more sustained recovery. Most employers expect to resume operation, and most workers expect to be able to return to their jobs.

The numbers in this and other measures, however, are beginning to indicate a greater share of the current layoffs may be permanent, either because of labor reductions or business closures. Whether this incipient trend becomes more pronounced will have a key effect on whether the recovery will be V-shaped—as some private data sources are now beginning to suggest—or whether we are in the initial stages of a “swoosh” recovery with an initial bounce followed by a gradual return to prior job and income levels as projected by Department of Finance and Legislative Analysts’ Office.

Although just beginning to be reported more widely, accuracy of the core data also has remained a question in the prior 3 months. Misclassifications in the household survey continue to underreport unemployment, although various corrective measures are reducing the size of the effect. Response rates continue to drop—15 percentage points lower than in pre-COVID months for the household survey and somewhat lower for the establishment survey due to closed businesses.

California Unemployment Rate Level 16.3%+ CA Unemployment

Rate

California's reported unemployment rate (seasonally adjusted) in May notched down 0.1 point to 16.3%. Continuing COVID-related issues with the core surveys used to estimate the labor force and jobs numbers, however, indicate the actual rate was higher.

Total reported employment dropped 60,700 from the revised April numbers, while total unemployment eased by 25,100.

The actual level of unemployment, however, was likely higher than the reported numbers. The labor force and jobs numbers are based on surveys done the week of May 12. The UI initial claims data shows substantial continuing increases in unemployment after that date, although now leveling into a range about 8 times above the 2019 averages. More importantly, BLS again indicated there were significant COVID-related issues in conducting the surveys for both the labor force and jobs numbers. While these issues have affected the numbers since March, the effect was somewhat lower but still substantial for the May numbers.

The more significant issue continues to be 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 indicates that correcting for this factor would have raised the national unemployment rate by 3 percentage points, down from a 4.8 point effect in April. Similar factors affect the California reported data but, based on analysis of the Current Population Survey data, at a somewhat higher level.

California UI Initial Claims 6.2m CA Initial UI & PUA Claims

Since the Week of April 14

The weekly Unemployment Insurance and Pandemic Unemployment Assistance (PUA—for self employed) initial claims data is an early and broader indicator of the extent of the economic effects from the emergency measures. Through the week of June 23, California’s initial claims rose a combined 6,237,667 since the measures went into effect. Following the initial upsurge, weekly claims have remained close to their 4-week average of 310,000. While generally leveling off, claims continue at a rate about 8 times above their 2019 average. These numbers do not translate directly into unemployed and include persons submitting more than one application, applications that are subsequently denied, and persons who find a job after applying. The continuing high levels of initial claims, however, indicates continuing economic effects from the current social distancing measures.

This week’s report also indicated a rise in the number of workers who have exhausted their regular benefits and are seeking a 13-week extension under the new Pandemic Emergency Unemployment Compensation (PEUC) program. California initial claims were at 425,056 or 39% of total claims nationally. Long-term unemployment was a significant problem in California as a result of the shallow recovery from the 2008 recession. The PEUC numbers will be an early indicator of this factor in the current recovery, especially important due to its effect of depressing future wage and income prospects for the affected workers.

WARN Act Job Stoppages 651.5k Employees Laid Off

Since April

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. Consequently, many of the recent reports cover layoffs effective in prior months. 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 April through June 17 was 651,485. Reports covering permanent layoffs or business closures eased to 10.8%, below the level 2 weeks ago but still above the initial results. The three highest counties--Los Angeles, San Diego, and Orange Counties--accounted for 54% of layoffs in the notices.

US Unemployment Rate 13.3% US Unemployment

Rate

The reported national numbers show US unemployment rate (seasonally adjusted) 1.4 points lower to 13.3%, but more likely was about 3 points higher due to the survey factors discussed above for California. Employment rose 3,839,000 and unemployment grew by another 2,093,000.

Nonfarm Jobs Up 141.6k 141.6k Nonfarm Jobs Change

Nonfarm wage and salary jobs rose 141,600 (seasonally adjusted) in May, while jobs nationally were up by 2,509,000. April's losses were revised to 2,415,000 from the previously reported 2,344,700. Strongest gains were in essential businesses and in alternative customer contact options for Accommodation & Food Services. Other than Government, most other industries indicated little change from the substantial April losses.

Counties with Double-Digit Unemployment All Counties With Unemployment

Above 10%

All counties continued to have an unemployment rate at 10% or above. The unadjusted rates ranged from 10.0% in Lassen to 28.9% in Imperial.

California Center for Jobs [[link removed]] The California Center for Jobs and the Economy provides an objective and definitive source of information pertaining to job creation and economic trends in California. [[link removed]] Contact 1301 I Street Sacramento, CA 95814 916.553.4093 If you no longer wish to receive these emails, select here to unsubscribe. [link removed]