California’s ‘Weak’ Job Market Held by Public Money While Private Sector Sheds Jobs

Stay informed with free information on issues important to all Californians. Subscribe to CalMatters nonprofit news in your inbox today.

A surge in public-sector employment and other jobs that are largely publicly funded has overshadowed a dismal California labor market that has seen a significant decline in private-sector jobs since its post-pandemic peak, a new analysis shows.

The state Legislative Analyst’s Office analyzed employment data from the U.S. Bureau of Labor Statistics for April and concluded that California’s private sector has lost a total of 340,000 jobs since its peak a few years ago.

The technology and financial sectors led the losses. Jobs in the information sector — whose top employers include household names like Google, Apple, Facebook and Disney — have fallen 16% since their peak. There were more than 531,000 such jobs in July 2022, but 98,000 of them have disappeared. Financial employment peaked at 500,000 jobs in December 2021, but has since shed 43,000 jobs, or 8%.

Three other industries have seen employment declines of 3% since the peak: business services, manufacturing, and transportation and warehousing. California has an unemployment rate of 5.2%, the highest in the nation in four months.

Meanwhile, the health care and social services industries have gained 240,000 jobs since September 2022, Chas Alamo, chief fiscal and policy analyst at the Legislative Analyst’s Office, said Monday. Alamo said the industry includes private employers such as dentists, child care providers, vocational rehabilitation centers and others, but is closely tied to government spending, so his analysis groups those jobs with public-sector jobs, which grew by 120,000 over the same period. His analysis was based on 12.5 million private-sector jobs in April and a total of 5.5 million jobs split roughly evenly between the public and publicly supported sectors.

“The jobs picture through late 2022 is weak,” Alamo told CalMatters, adding that the state’s monthly employment data should be “treated with caution” because early revisions show that the state did not actually add jobs last year, despite what the monthly employment reports say. The monthly employment reports are based on surveys of businesses; the revisions by federal agencies are based on state unemployment insurance data.

California relies heavily on personal income tax revenue, so the types of jobs it loses or gains matter.

Brooke Armour, president of the California Center for Jobs and the Economy, said that “any job growth is good.” But she added that “we’re losing good-paying jobs that help fund the (state) budget. We’re gaining hospitality and service jobs, which are low-paying jobs. We’ve emptied out middle-class jobs.”

The center is the information arm of the California Business Roundtable, an advocacy group that includes top executives at the state’s largest employers. The group’s latest analysis of employment data mirrors Alamo’s assessment of the state’s labor market. While the center’s report cites the group’s repeated complaints about the high cost of doing business in the state, it attributes much of the tech job loss to pandemic-related hiring sprees.

“What we’re seeing with tech jobs is a correction,” Armour said.

The center’s report found that tech companies still prefer to stay in the tech hubs of Silicon Valley and the Bay Area. That’s also important for state treasuries, which have become increasingly dependent on the tech industry’s stock market performance.

“But if these tech companies are still here, are they expanding here or elsewhere?” Armour asked. “We’re seeing a lot of them investing outside of California.”

As for whether the state’s large budget deficit could impact public sector job growth, Alamo of the Legislative Analyst’s Office said the public sector also includes jobs supported by the federal government. He added that jobs in the health care and social services sectors are likely to continue to grow “despite the state’s budget challenges.”