Unemployment in California is falling, as the economy seems to be emerging from its spring-summer slumber.

Statewide unemployment dropped to 11.7 percent in October, down two-tenths of a point, the Employment Development Department said Friday.

Payrolls expanded by 25,700, with the Bay Area leading the way. Toss in a dramatic upward revision in the September data, and California has added 86,000 jobs in three months.

"I don't think it's a fluke," said Howard Roth, chief economist at the state Department of Finance.

But it's too early to start celebrating.

The numbers, while encouraging, are still considerably short of boom levels. Hiring hasn't spread to much of inland California, including Sacramento, where the weak housing market is keeping the economy flat. Sacramento-area unemployment was unchanged at 11.4 percent in October.

And while more jobs statewide will mean more tax revenue, it likely won't be enough to ward off steep cuts in state spending, as forecast earlier this week by the Legislative Analyst's Office.

"Probably one month's data alone isn't going to change (the forecast) significantly, but it could change it a little," said Jason Sisney, deputy legislative analyst.

The Legislature over the summer authorized up to $2.5 billion in "trigger" cuts if a $4 billion surge in tax revenue doesn't materialize. This week, Sisney's boss predicted revenues will come up $3.7 billion short.

The Department of Finance will issue its own forecast in mid-December, to be accompanied by a final decision on the cuts. The spending reductions would kick in early next year.

A budget miracle seems unlikely.

"There's still a lot of unemployment. People don't have the confidence to go out and spend," said Michael Shires, a budget and tax expert at Pepperdine University.

Still, the latest job figures were welcomed, following months of discouraging news that raised fears of a double-dip recession. They dovetail with recent reports suggesting new strength in the national economy.

"The best report we've seen in a long time," Roth said. "That doesn't mean we're out of the woods, but it certainly looks nice.

"It's still a slow rate (of growth). We still need to see monthly job gains bigger than this if we're going to get those unemployed people back on their feet."

Stephen Levy, who runs the Center for Continuing Study of the California Economy, said the state's payrolls have grown by 1.7 percent in the past year. That compares favorably with the U.S. average of 1.2 percent.

The growth isn't being spread evenly, with most of the strength coming in coastal cities. Thanks largely to the expanding tech sector, San Francisco, Oakland and San Jose gained a combined 13,500 jobs last month.

"Other places are doing pretty well, Orange County and San Diego," Roth said.

The Central Valley is a different story, with unemployment between 13 and 15 percent in many counties. Although Sacramento unemployment held steady at 11.4 percent, payrolls in the region actually shrank by 100.

The numbers add up to a job market that's still ailing.

"The Sacramento area is kind of holding on," said Jeff Michael of the University of the Pacific's Business Forecasting Center.

Michael said he's encouraged that Sacramento's construction and finance sectors have "bottomed out." Construction employment is 3 percent higher than it was a year ago.

But unemployment among area construction workers still exceeds 30 percent, said Matt Kelly of Sacramento-Sierra's Building and Construction Trades Council. The job growth "is so slight, we don't want to get excited about it," Kelly said.

And other segments of the construction business are still cutting back.

SierraPine, a manufacturer of fiberboard and other construction products, said Friday that it will lay off 48 workers at its Rocklin plant in mid-December. The plant is closing one of its two production lines, leaving 20 workers on the job, said SierraPine President Jim Skinner.

Skinner said the decision was influenced by some new environmental regulations. But the big driver was the poor construction market.

"Housing start numbers have continued to lag," Skinner said. "This trough has persisted longer than any of us expected."

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Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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