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

for June 2020

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

In the latest data, California’s seasonally adjusted unemployment rate eased from the revised 16.4% in May to 14.9% in June. The unadjusted rate—the more relevant measure given the extent to which seasonal factors have been overwhelmed by the economic closures—went from 16.0% to 15.1%.

Neither measure, however, reflects the current situation. The numbers released today are based on surveys done the week of June 12, prior to the recent order reclosing many businesses throughout the state. The more current initial unemployment insurance claims data indicate that the unemployment situation had been worsening even prior to this order. The number of new unemployed had been stabilizing up to the week of June 12th, but then began accelerating again in the following weeks. The most recent numbers (regular UI plus PUA for self-employed) were a full third above the week of June 12 level.

The employment data also has been suffering from technical issues related to the surveys used to estimate it, including misclassifications and a sharp drop in survey response rates. Corrections made by the agencies appear to have reduced this source of undercount in the June numbers, but the official “unemployed” still does not cover the many workers not counted in the official labor force. The official (unadjusted) number of California unemployed in June was 2.85 million. Analysis of the unemployment insurance claims data released yesterday indicates the current number is likely 74% higher.

More troubling are indicators about who is unemployed. The weekly data [[link removed]] for the state income tax shows that cumulative withholding since March is only about 2% below the same period in 2019. Given the state’s steeply progressive income tax structure, this result indicates that higher wage workers who are subject to tax have been far less likely to have been laid off, including because of widespread adoption of telework and other flexible work schedules that have managed to keep workers at these wage levels employed. This result is particularly seen in a comparison to weekly withholding for federal income tax—which begins to apply at much lower wage levels—which is down about 10%.

The number of permanent layoffs is also growing. Nationally, the initial round of layoffs captured in the April data showed only 10% of layoffs were permanent. Employers at that point largely still expected to bring workers back as soon as they were able. The June numbers show the share of permanent layoffs has jumped to 20% as employers, especially small businesses and employers in some of the hardest hit industries such as travel and food service, have had to make hard choices. The Center’s analysis of the WARN Act data released yesterday indicates the same trend towards permanent layoffs is occurring in California.

The weekly Census Bureau pulse survey [[link removed]] data suggests this trend may accelerate. In the most recent data for the week of June 27, 10% of California small businesses (less than 500 employees) reported having cash on hand covering only two weeks or less of business operations. In total, a quarter had only four weeks or less. Many of them used the first half of July spending these reserves down to ready their businesses for reopening, only then to face the new orders to reclose and forgo the prospect of sales to cover these costs. This financial weakening is likely to produce additions to the number of permanent layoffs.

The economic projections behind the recently approved state budget already indicate low expectations from both the Administration and LAO on how quickly California will be able to recover from the current crisis. Both job and employment levels currently are not expected to return to their pre-COVID levels until 2024 or beyond. The current upsurge in layoffs, the trend towards more of these layoffs being permanent, and the weakened cash position of many small businesses as they are being buffeted by the current series of openings and reclosings are likely to push the recovery date even further into the future. The federal government [[link removed]] and other states [[link removed]] are taking steps to accelerate recoveries once reopening becomes the stable norm. In its adherence if not expansion of its high tax and high regulation policies, California has yet to adopt any significant measures in this regard.

California Unemployment Rate Level 14.9%+ CA Unemployment

Rate

California's reported unemployment rate (seasonally adjusted) in June declined 1.5 points to 14.9%. Continuing COVID-related issues with the core surveys used to estimate the labor force and jobs numbers, as discussed above, indicate the actual rate was higher.

Total reported employment rose 653,300 from the revised May numbers, while total unemployment dropped by 212,000.

California UI Initial Claims 7.8m CA Initial UI & PUA Claims

Since the Week of March 21

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 July 11, California’s initial claims rose a combined 7,765,284 since the social distancing measures went into effect. Initial claims had been stabilizing at about 310,000 beginning the second half of May, but began accelerating again the week of June 20 as more companies began to announce permanent layoffs.

These numbers do not translate directly into the number of unemployed and include persons submitting more than one application, applications that are subsequently denied, and persons who find a job after applying. The initial claims numbers, however, are likely to accelerate further in the coming weeks as a result of the recently announced reclosings.

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. The most recent weekly data showed California initial claims 228,564 or 24% 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 and the subsequent effect of worsening income equality.

US Unemployment Rate 11.1% US Unemployment

Rate

The reported national numbers show US unemployment rate (seasonally adjusted) improved by 2.2 points to 11.1%, but more likely was higher due to the survey factors discussed above. Employment rose 4,940,000 and unemployment dropped by 3,235,000.

Nonfarm Jobs Up 558.2k 558.2k Nonfarm Jobs Change

Nonfarm wage and salary jobs rose 558,200 (seasonally adjusted) in June, while jobs nationally were up by 4,800,000. May's gains were revised to 134,200 from the previously reported 141,600. Strongest gains were in Accommodation & Foods Services, Health Care & Social Assistance, and Retail Trade. Losses continued in Mining & Logging and in Government due to seasonal factors related to schools.

Counties with Double-Digit Unemployment 56 Counties With Unemployment

Above 10%

All but two counties continued to have an unemployment rate at 10% or above. The unadjusted rates ranged from 9.5% in Lassen to 27.3% 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]