California economy finishes 2018 on a strong note, adding 24,500 jobs

California’s job market finished 2018 on a strong note as payrolls continued to expand despite concerns over a volatile stock market, a continuing trade war with China and fears of a possible U.S. recession.

The state added 24,500 net new positions in December for a total of about 17.28 million, according to the California Employment Development Department. That was just short of November’s rise of 25,700.

Year-over-year, payrolls expanded by 284,300, an increase of 1.7%.

December’s unemployment rate ticked up slightly to 4.2%, from 4.1% in November, reflecting a rise in the number of job seekers in a tight labor market.

“Large numbers of Californians are finally coming off the sidelines to again look for work as the job market has continued to improve,” said Lynn Reaser, an economist at San Diego’s Point Loma Nazarene University. “In the last quarter of 2018, the labor force expanded by 208,200, a sharp contrast to the 6,000 increase posted in the final quarter of 2017.”

The U.S. added 312,000 positions in December, one of the strongest months of job gains in a decade. Nationwide unemployment was 3.9%.

California’s gains were widespread, with nine of 11 broad industry sectors expanding last month. Leisure and hospitality, which includes hotels and restaurants, added the most jobs (9,500), reflecting the Golden State’s historical allure as a tourist mecca.

Los Angeles County alone hosted an estimated 50 million visitors in 2018, a 3.1% improvement over 2017’s total. It marked the eighth straight year of tourism growth.

“California has outpaced the nation’s economic growth,” noted Sung Won Sohn, president of SS Economics, a Los Angeles consultancy. “The holiday shopping season was a barn-burner for retailers, both online and offline. The drop in the price of oil has boosted the purchasing power of consumers.”

But Sohn cautioned, “Aches and pains associated with the aging economic recovery process are beginning to show up. In 2018, the Golden State produced 284,500 jobs compared to 366,000 the year before. Most likely the slowdown will continue into 2019. Labor shortages are the primary headwind, exacerbated by high cost of housing and doing business in California.”

The two sectors reporting job losses in December were construction (down 1,300) and “other services,” a grab-bag category that includes machinery repair shops, dry cleaners and mortuaries, where employment was down 300.

The drop in construction was no cause for concern, according to Michael Bernick, a former EDD director who tracks the job market. “Some loss could be expected after over eight years of nearly steady growth, from around 450,000 jobs in early 2010 to over 858,400 jobs in December,” he said.

The number of unemployed Californians was 813,900 in December, a rise of 7,300 over the month, but down by 52,500 from a year earlier.

David Smith, an economist at Pepperdine University in Malibu, called the December job numbers “cause for cheer. Jobs are available for those who are in need of employment.”

But, he added, “Increasingly employers, especially small and medium-sized businesses, are struggling to find workers. Employers are grumbling about not having enough help and new hires simply not showing up or reporting other employment. This ‘ghosting’ is only making matters worse for firms that maintain lean operations and have orders to fill.”

On the bright side, a tight labor market is driving a rise in wages after years of stagnation. U.S. pay rose 3.2% in December over a year earlier. Smith said California’s December information is not yet available, “but we can say confidently it will closely mirror the national numbers.”

December’s job growth and unemployment varied across Southern California.

Los Angeles County payrolls expanded by a net 6,000 positions last month to 4.93 million, a 1.3% rise from December 2017. The county’s jobless rate was 4.6%.

The Orange County workforce dropped to about 1.65 million, with a net loss of 4,200 jobs. The county’s unemployment rate was 2.8%.

In the Inland Empire, Riverside and San Bernardino counties’ payrolls dropped by 2,300 positions to a total of about 1.53 million. The unemployment rate was 4.1% in Riverside County and 3.8% in San Bernardino County.

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