In a heartbeat, California unemployment quadruples. COVID-19 erases millions of jobs

California’s unemployment rate has quadrupled.

In barely two months.

Confirming the shockingly quick downturn in the economy, state officials reported Friday that unemployment in California soared to 15.5 percent last month. An estimated 2,344,700 Californians lost their jobs in April during a furious and historic scramble to comply with Gov. Gavin Newsom’s coronavirus stay-at-home order. The new unemployment rate is worse than anything seen during the Great Recession, and represents a jump of 10 percentage points since March.

It marked one of the largest one-month economic bloodbaths since the Great Depression, when unemployment soared to an estimated 25 percent. Unemployment during the last recession peaked at 12.3 percent in 2010.

And it’s going to get worse, despite the partial reopening of the economy. Friday’s report reflects surveys conducted in mid-April and don’t capture hundreds of thousands of additional layoffs that have occurred statewide since.

”By no means have we reached the peak. We have some more pain to go through,” said Sung Won Sohn, a business economist at Loyola Marymount University in Los Angeles.

The new numbers could increase the pressure on Newsom to loosen his stay-at-home order beyond what he’s allowed already.

In February, before COVID-19 turned the economy and everyday life upside down, unemployment was just 3.9 percent and the state was enjoying ten straight years of job growth. That’s all been wiped out, and then some, and the unemployment rate is four times higher.

“We have gone from a record low unemployment rate to a record high,” said Chris Dombrowski, acting director of the Governor’s Office of Business and Economic Development, in a prepared statement. “As Governor Newsom has said, this is our collective sobering reality, and without additional assistance from the federal government, the very programs that will help people get back to their lives and get back to work, will continue to be impacted.”

Newsom has called on Congress to help patch the state’s estimated $54 billion budget deficit.

Greater Sacramento’s unemployment rate soared to 14.2 percent in April, the EDD said, surpassing the 12.7 percent peak from the last recession.. About 151,000 jobs vanished in the region, or about 15 percent of all the jobs in Sacramento, Yolo, Placer and El Dorado counties. The leisure and hospitality sector of the area’s economy - restaurants, hotels mostly - were carved in half as 52,000 jobs disappeared.

The job numbers have left millions anxious for signs of a turnaround. “I’m eager to get back to work,” said Joe Fahey, a Dixon resident who consults for labor unions and nonprofits. He recently pitched a project to one of his union clients but was turned down because “their financials came back way worse than expected.”

Severe cuts across all California businesses

Statewide, the scope of the downturn was breathtaking. Every major sector of the economy lost jobs in April, from schools to factories. The shutdown of the tourism industry, and the severe restrictions on restaurants, had the biggest impact on the jobless numbers. The leisure and hospitality sector eliminated 866,000 jobs, more than any other industry.

“Many of these jobs are relatively low paying, making the pain even greater for those affected,” Sohn said.

Retailers let 17 percent of their workforce go statewide. Factory employment fell by 11 percent, construction by 15 percent. The health care industry wasn’t immune, either, cutting nearly 9 percent of its payrolls as hospitals shelved non-emergency care to make way for COVID-19 patients and dentists’ offices shut down.

No area of the state was spared. Unemployment reached 20.3 percent in Los Angeles. It was 26.3 percent in Colusa County and 28 percent in Imperial, traditionally two of the poorest areas of the state.

The job losses were comparatively modest in the Bay Area, where tech companies were able to keep most of their employees working, albeit remotely. San Francisco’s unemployment rate was 12.1 percent.

Rates soared throughout the Central Valley, although they didn’t surpass the levels of unemployment witnessed during the last recession.

• Fresno’s unemployment rate hit 16.7 percent, up from 11 percent a month earlier, as 21,000 jobs disappeared.
• Unemployment in Modesto reached 17 percent, more than double the 8.4 percent rate in March. The Modesto area lost 22,200 jobs.
• In Merced, the rate hit 18.8 percent, up from 13.2 percent, as 7,900 jobs vanished.

Meanwhile, in San Luis Obispo, the rate was 13.7 percent, a leap from 3.8 percent in March and substantially above the peak unemployment of 10.5 percent reached in the Great Recession. The area lost 17,900 jobs.

Although California lost more jobs than any other state, the highest unemployment rate in the nation belonged to Nevada, at 28.2 percent, where the all-important tourism industry has been shuttered. Michigan, a hot spot for the coronavirus, had 22.7 percent unemployment and Hawaii registered 22.3 percent.

California’s rate compares with the U.S. unemployment rate of 14.7 percent.

Activists pushing to open faster

The high jobless rate has been a flashpoint for conservative activists who are pressuring Gov. Gavin Newsom to more quickly reopen the state’s economy, valued at around $3 trillion. To date, more than 86,000 Californians have tested positive for COVID-19 and more than 3,500 have died of the disease, out of 40 million residents.

As the state enters Phase 2 of Newsom’s reopening plan, many business are cautiously opening with strict social-distancing rules. In some counties, that includes retailers, shopping malls and dine-in restaurants.

But hair and nail salons, tattoo parlors and indoor gyms, as well as bars and nightclubs remain closed, and Newsom is facing growing resistance to the lockdown of the economy.

Thousands of pastors have vowed to hold church services May 31 in defiance of the governor’s order. Several Indian casinos, which are considered sovereign territory and don’t have to obey Newsom’s rules, have reopened, including Hard Rock Hotel & Casino in Wheatland north of Sacramento.

Newsom has said it will be weeks or months before the economy is fully reopened and Californians are allowed to go to movie theaters and other large gatherings.

Even as more businesses open, many economists believe consumers and businesses alike will be careful. “Businesses will be cautious about hiring people,” Sohn said.

Yet Chris Thornberg, founder of the Beacon Economics consulting firm in Los Angeles, said he thinks the recovery will be much faster than the last recession, when the economy was plunged into a deep spiral by the popping of the real estate bubble.

This time, the basic economic foundation is considerably stronger, he said.

“This is nothing like the Great Recession,” he said.

The flood of mass layoffs and furloughs in California has overwhelmed the state’s unemployment department, which has promised to hire 1,800 people — including 600 phone agents — over the next two weeks. A barrage of frustrated out-of-work California residents have jammed phone lines at the Employment Development Department and complained about lengthy waits for answers.

This story was originally published May 22, 2020 at 7:17 AM.