200K California workers vanish from labor force as job growth stalls

California’s latest jobs report isn’t looking too bright, even as Gov. Gavin Newsom continues to tout the state as a high-powered employment creator.

So far this year, the state has been holding one of the nation’s highest unemployment rates, according to the federal Bureau Labor of Statistics. The rate stood at 5.3% last month, partly attributed to the job market hitting the tech and entertainment sectors particularly hard.

The unemployment rate improved slightly since December, dropping from 5.5% to 5.3% through May, but the state Legislative Analyst’s Office revealed an unpleasant truth behind the decrease.

The labor force participation rate declined from 62.6% to around 62.0%, meaning 200,000 fewer people were working or looking for work. Three-fourths of that reduction came from workers who were employed, and the remaining quarter came from workers who were unemployed, the analyst’s office said.

“Overall, the unemployment rate fell because fewer Californians were actively in the labor force,” said analyst Chas Alamo. “Workers who leave the labor force because they cannot find a job or for any other reason are no longer counted as unemployed.”

Since January, the number of employed Californians is down more than 150,000, according to a survey of households. Data shows a persistent negative change in employment reported by households throughout this year so far, with 44,000 fewer Californians employed in May.

Meanwhile, job growth has seemed to flatline. Over the last four months, the state averaged 6,000 jobs per month, about the same as the “sluggish” rate last year, according to the analyst’s office.

California’s outsized dependence on Silicon Valley and its AI boom has buoyed the state’s finances, but it also illustrates how susceptible the state is to job losses. The number of tech job losses have attracted many headlines over the past months.

Many have also lamented the decline of Hollywood as policymakers grow concerned about sustaining the industry in Southern California.

Some experts attribute the sluggish job numbers seen in recent months to the state’s high costs and regulations that make opening a business in California less likely.

It’s “the costs and liabilities of hiring in California — costs and especially liabilities that are higher than other states,” employment lawyer Michael Bernick told the Sacramento Bee.

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