Posted: 22 Sep 2009 02:42 PM PDT
Official unemployment in California, the most populous state in the US, has reached a new historical milestone. At 12.2 percent in August, it is now at the highest level since 1940. It has risen 4.6 percentage points over the course of the last year alone.
The recently released unemployment figures from the Bureau of Labor Statistics reveal the social reality that lies behind official claims of an end to the economic downturn. Just last week, speaking before an audience at the Brookings Institution in Washington DC, US Federal Reserve Chairman Ben Bernanke claimed that the recession is "very likely over." For workers throughout the country, however, the crisis is intensifying.
As high as it is, the statistic fails to capture the true gravity of the jobs situation in California. The 2.5 million people represented in the August figure do not include those who are out of work but have given up looking for a job, or those who are involuntarily working part-time. By some estimates, when calculated together, the unemployment and underemployment rate in California stands at 23 percent.
Even this number, however, does not take into account the thousands of undocumented immigrants out of work in the state. Many immigrants are employed in the construction industry, which has been extremely hard hit by the downturn. Thus, the economic crisis in California affects workers in Mexico and Central and South America, as millions of families are dependent on remittances from relatives.
What is happening in California is not unique to the state. Nevada and Rhode Island both have even higher jobless rates. In Michigan, the forced bankruptcies of Chrysler and General Motors, which were planned, orchestrated, and overseen by the Obama administration, have contributed to an unemployment rate of 15.2 percent. In Ohio, another state that had been part of the country's industrial heartland, the unemployment now stands at 10.8 percent. Official unemployment for the US as a whole will soon reach double digits.
However, the unemployment rate in California has a special historical significance. Known as the "Golden State," California was once a symbol of post-war prosperity in the US. In addition to being a major agricultural producer, it was also home to a significant portion of the country's aerospace, shipping, automotive, and technology industries.
LOS ANGELES — California 's unemployment rate in August hit its highest point in nearly 70 years, starkly underscoring how the nations incipient economic recovery continues to elude millions of Americans looking for work.
While job losses continue to fall, the states new unemployment rate — 12.2 percent, according to the Bureau of Labor Statistics — is far above the national average of 9.7 percent and places California, the nations most-populous state, fourth behind Michigan, Nevada and Rhode Island. Statistics kept by the state show Californias unemployment rate was 14.7 percent in 1940, said Kevin Callori, a spokesman for the California Employment Development Department.While California has convulsed under the same blows as the rest of the country over the last two years, its exposure to both the foreclosure crisis and the slowdown in construction — an industry that has fueled growth in much of the state over the last decade — has been outsized.
Total building levels in California have fallen to $23 billion this year from $63 billion in 2005; home building this year is less than a quarter of what it was in 2005, according to the Center for Continuing Study of the California Economy. Roughly 500,000 of the states job losses have been in construction, finance, real estate and industries related to construction.
We were at the epicenter of the housing bubble, and we are at the epicenter of the fallout, said Stephen Levy, senior economist and director of the center. The reason we are doing worse in California than other states is construction.
While California has enjoyed some signs of a comeback in recent months, unemployment, which is often the last economic indicator to turn around in a protracted recession, is expected to remain high for the near future. For example, a recent study by the University of California, Los Angeles, predicted that while the state would enjoy 2 percent quarterly growth in 2010, the unemployment rate would remain above 10 percent.
Such numbers have caused deep pain to a state overly reliant on personal income taxes to balance its budget. The near collapse of the stock market, which greatly reduced personal wealth in the state, and job losses related to the housing bust combined to sharply reduce that source of revenue.
In July, Gov. Arnold Schwarzenegger signed a budget that closed a roughly $24 billion two-year gap with extensive cuts to social services, parks and education. This has left the state with large numbers of people without jobs seeking government services, which further strained its resources and hindered potential consumer spending among laid off and furloughed government workers.
The governor seized on Californias grim unemployment milestone Friday to make a case for his current pet projects: revising the states tax system, fixing its broken water system, which has contributed to unemployment in the states farm regions, and tapping the federal government for all he can get.
The latest unemployment numbers reinforce the importance of combining federal, state and local efforts to put Californians back to work and to help all those struggling in this difficult economy, Mr. Schwarzenegger said. Immediately addressing our challenges, which include reforming the states antiquated tax structure and updating our water delivery system will move the state forward and build a stronger, more diverse economy. While I am pleased to see fewer jobs lost, my administration will not rest until job growth resumes and employment returns to normal.
Earlier this week, Ben S. Bernanke, the Federal Reserve chairman, proclaimed that the country was emerging from its protracted recession, and doubtlessly, California is showing its own signs of recovery. In Southern California, the center of the housing bust, home sales rose 11 percent in August from a year earlier, and prices have begun to tick up as well. In addition, the states exports are once again growing as international economics, particularly in Asia, have begun to recover and create demand for goods, and layoffs have slowed statewide.
Any economist would tell you were in a recovery, Mr. Levy said. Job losses are lessening, the G.D.P. is rising, the housing market is stabilizing, and have you looked at the stock market lately? But the unemployment rate is the thing families care about. They dont care about G.D.P. or China coming back; they care about jobs.
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