California boosts payrolls by 40,300 workers in June, but unemployment rises to 5.4%

Defying critics of new state regulations, California continued to pad its hefty payrolls in June. Employers added a net 40,300 jobs over the month, the state reported Friday.

But unemployment in California increased to 5.4%, from 5.2% in May. The national unemployment rate also ticked up, to 4.9% in June from 4.7% in May.

More Californians entered the job market in June, which probably explains why the jobless rate increased even though the state added a healthy number of new positions.

“The improvement in the labor market is pulling more people in,” said Mark Vitner, a senior economist at Wells Fargo. June is generally a volatile month, said Vitner, because schools let out and some younger workers begin looking for summer jobs.

In the last 12 months, California added 461,100 jobs, growing at a rate of 2.9%, faster than the national rate of 1.7%. Unemployment has dropped sharply since June 2015, when it stood at 6.2%.

Los Angeles County employers added a net 8,700 new jobs in June and unemployment dropped to 4.8%, from 4.9% in May. Manufacturers in Los Angeles were still struggling, posting a loss of 5,800 jobs in the last 12 months.

Despite the state’s jobs gains, California’s climate for employers has drawn fresh criticism of late, thanks to increases in the minimum wage, new mandatory paid sick leave and laws that increase liability for labor violations.

The U.S. Chamber of Commerce said in a report this month that those policies were costing California its long-held economic advantage over the rest of country.

And yet, the state has barreled through 2016, posting job numbers that would make almost any governor jealous.

Altogether, seven industries added 49,900 jobs in June, led by the hospitality and professional services sectors.

Those two industries span the low and high ends of the job market in the state. Professional services include tech jobs in software engineering and computer system design – think Google, Facebook and much of Silicon Valley.

It is surprising, economists said, that restaurants have kept hiring hoards of new workers given that those businesses are projected to feel the pain of rising wages most acutely.

“I don’t know that we will continue to defy gravity,” said Vitner, the Wells Fargo economist. “I don’t know that the higher minimum wage is going to bite until the economy slows, and then it might bite hard.”

The trade and information industries, which include software publishers but also entertainment companies, were the biggest losers, cutting 3,600 positions over the month.

Construction hiring has soared from a post-recession low as real estate values boom, but it seems to be slowing down. The industry cut jobs in May and again in June. Over the last 12 months, construction added 32,300 positions, compared with 54,200 new jobs added in the 12 months prior.

“There are plenty of jobs available in construction, but it’s going to be a long time before the industry finds that it has filled all the positions with skilled workers,” says Ken Simonson, the chief economist at the Associated General Contractors of America, the industry’s biggest trade group.

California is still piling on construction jobs faster than the rest of the country. Simonson said the construction downturn during the Great Recession turned workers away from trades like carpentry. That has left companies with a dearth of qualified people.

“There are still going to be a lot of construction projects going on later this year,” said Simonson. “The question is, who is going to be available to build them?”

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UPDATES:

1:30 p.m.: This article has been updated with additional data and analysis.

This article was originally published at 9:10 a.m.