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

Overall, the October data shows a continuation of the prior two-month trend for wage and salary jobs, with California experiencing a somewhat higher recovery growth compared to a slowing in the rest of the country.  Employment, however, saw a sharp increase in the state, and results from the upcoming months and annual revisions will indicate whether this outcome is a statistical result from the survey data or whether it indicates a real improvement in the state’s economy.

The household survey used to estimate the October employment numbers was conducted the same week the state announced its new Blueprint for a Safer Economy tier structure providing more clarity to employers on the current restriction provisions.  Employers were given more information on when and how they could reopen.  Considering this factor, the October employment jump is consistent with the previous upsurge seen accompanying the business openings in June.  The June numbers, however, were soon followed by a slowing caused by the second round of closures ordered by the governor.  More recent changes in the tiers indicate a similar shift is now likely underway.

The most recent tier allocations for November 16 saw the two most restrictive tiers go to covering 52 counties from the previous 34.  The most restrictive Tier 1 went from 12 counties to 42.  This shift means 94.9% of the unemployed workers in October face the Tier 1 restrictions on their job prospects.  Combined, 99.8% of unemployed workers are in the top two tiers.

The effects from this third round of business closures, however, will not be known until the December employment reports to be released in January.  The surveys used to develop the November estimates were done the week prior to the most recent tier actions.
The chart above, however, reflects the continued disparate effect of the closure strategy on lower wage workers.  Rather than moving the workers hurt hardest by the closures towards improved job availability, the results from the latest tiers essentially move virtually all of them back to the starting line. 

For employers, these shifts also add another element of risk in an otherwise disastrous year.  Restaurants and many small retailers fundamentally rely on 4th quarter earnings in order to stay in business.  The large share of annual income that starts with back-to-school and continues through the holidays determines the viability of their operations, and most businesses at this level consequently make a decision on whether they have to fold in January and February after their annual cash flow levels are set.  This new round of closures comes at the worst time for small business survival in the state.

Conditions in the other side of the state’s economy have been far less affected by the state’s strategy, as encapsulated in LAO’s release of their Fiscal Outlook last week.  Rather than the $54 budget deficit previously shaping the current Budget Act, the LAO now projects state revenues will be $38.5 billion higher in their mean forecast, and as much as $50 billion higher under their “most likely” forecast range.  The core reason for this wide divergence from prior forecasts is due to the resilience of the higher wage economy under the current crisis conditions, in large part due to telecommuting that has limited job losses in businesses other than traditional retail, service, and other customer-contact situations.  As stated by LAO, workers earning less than $20 an hour constitute the vast majority of job losses, while workers earning over $60 an hour continue to be employed at pre-pandemic levels.