California jobless rate rises to 6.2%; Sacramento hits 6.5%

Unemployment in California is the worst in almost four years, and there are few signs the job market will improve soon.

The housing slump and other economic problems drove statewide unemployment up a half-percent to 6.2 percent last month, the Employment Development Department said Friday.

The Sacramento region's unemployment rate climbed three-tenths of a percent to 6.5 percent, the highest in 11 years.

Employers across the state added 1,000 jobs in March, and while that was better than the nation as a whole, it's clear California is experiencing a downturn. The biggest source of new jobs in California last month: the last of the writers and production workers who returned to work following the Hollywood writers strike.

"We probably have a mild recession," said Palo Alto economist Stephen Levy, echoing what many experts believe.

Levy, director of the Center for Continuing Study of the California Economy, said the state has the nation's third highest unemployment rate, behind Michigan (7.2 percent) and Alaska (6.7 percent).

Howard Roth, chief economist at the state Department of Finance, looked over the March job numbers and said, "Not a whole lot of good here."

The Sacramento-area rate of 6.5 percent in March was the highest since it was 6.6 percent in January 1997, when the region was still shaking off the effects of the early 1990s recession.

The area did add 4,300 jobs in March, but the pool of job seekers grew so quickly that the unemployment rate went up, said Diane Patterson, labor market consultant at EDD.

Much of the hiring in Sacramento was by state and local government, but it's unclear how long the public sector can continue growing. The state is facing an estimated $9 billion budget deficit in the upcoming fiscal year; Gov. Arnold Schwarzenegger is seeking deep spending cuts. The city of Sacramento is resorting to layoffs, and many school districts are looking for ways to cut back.

There were continuing signs of a slowdown in the Sacramento area's private sector as well. The leisure and hospitality sectors picked up just 200 jobs, low for this time of year, Patterson said. Retailers in the area eliminated 400 jobs. Construction firms added 300 jobs but still employ 5,000 fewer workers than they did a year ago.

Layoffs are spreading to many segments of the area economy. Michael's Furniture, a Sacramento manufacturer owned by struggling retailer Restoration Hardware, eliminated 108 jobs in March, according to state records. Restoration Hardware declined to comment.

National Distribution Centers, a West Sacramento warehouse, expects to lay off 175 workers at the end of April. Officials with National Distribution couldn't be reached for comment.

There is plenty of anxiety to go around at Sacramento's college campuses, where students are combing the help-wanted ads for summer, permanent and part-time jobs.

"It's kind of difficult," said Candace Welch, a student at California State University, Sacramento. "There's not as many jobs." She's looking for part-time work as a receptionist or bank teller.

Fellow student Aaron Torn, who works at Arden Fair, is worried about finding a summer job in his hometown of Stockton. He's made inquiries at fast-food joints, but he's not sure what his prospects are.

"If you know people, it's easy. If you don't …," he said, his voice tailing off.

Karl Dinse, managing partner at Management Recruiters of Sacramento, said his firm is getting more résumés from college graduates than in years past. While openings still exist, "that market is definitely softer than it was a couple of years ago."

As for more experienced job applicants, Dinse called the market "a mixed bag." The financial sector, with its close ties to real estate, remains weak. But technology is holding up.

Overall, "it's not gloom and doom, it's not panic," he said. "I've been doing this 32 years, I've seen a lot worse."

The statewide unemployment rate of 6.2 percent is the highest since 6.2 percent in July 2004, when the final remnants of the 2001 recession played out. But it's still considerably lower than the 9.9 percent peak reached in 1992, at the worst of the early 1990s recession.

In the past year the state has lost 12,000 nonfarm jobs, EDD said. In the 2001 recession, statewide job losses totaled 259,000, Roth said.

The state's chief economist said the gradual job decline this time around isn't surprising, given that the downturn is being driven by a relatively slow-moving deflation of the housing market.

"When a real estate bubble breaks, it's like a slow leak," Roth said.

It's likely there's further room for decline. "We don't see a whole lot of signs that this leak is over yet," he said.

Levy saw it differently. He said "the silver lining" in the economic downturn is that housing prices are falling relatively quickly – which he considers a necessary condition before economic growth can resume.

"Home prices in areas like Sacramento were way out of reach of the average homebuyer," Levy said. "Getting us through this quickly is the key to going forward."

Housing prices have dropped 27 percent in Sacramento County in a year, according to DataQuick Information Systems Inc.

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