Workers Leaving California Labor Force Even As Unemployment Stays Near Record Lows

California’s unemployment rate remains at a record low of 4.2 percent in the latest jobs report out Friday. But a closer look shows 2018 has not exactly been a banner year for the state’s labor market.

While the California economy is historically strong right now — in its 99th consecutive month of expansion since the recession bottomed out in 2010 — the 62 percent of working-aged Californians participating in the labor force is also historically low.

“We’ll look back on this time in California as a very rare time of fuller employment,” says Michael Bernick, a fellow at the Milken Institute who used to run the Employment Development Department, the state agency that puts out these jobs reports.

“At the same time,” he adds, “it is true that the labor force participation rate of prime-age adults, particularly men, is the lowest it’s been.”

In fact, although the unemployment rate has held steady or dropped every month this year, the civilian labor force has lost more than 50,000 workers since February. And most months’ job gains this year have been minimal — including a paltry 800 new jobs last month.

Bernick blames the labor force drop on several factors: a drop in blue-collar manufacturing jobs; changing cultural norms, such as an increase in stay-at-home dads; and the growth of state benefits programs such as disability insurance.

The only group that’s seen an increase in labor force participation is 65-and-older. Bernick says some of those people are choosing to keep working, while others simply have to.

The biggest risk to California’s continued economic growth could be a potential trade war. Bernick says the agricultural industry — and other sectors that support it — could take big hits.

“So far, in terms of our state numbers, the trade war hasn’t had an impact on employment,” he says. “But that’s only so far.”

The Sacramento-area unemployment rate was 4.1 percent in June, down from 4.6 percent in June of 2017, a nearly 20-year low for the month.

"The last time it was that low or near that in June was in June 1999 when the rate was 4.2 percent," said EDD’s Cara Welch.

Although year-over-year numbers are down, month-over-month numbers are up. June's 4.1 percent jobless rate is up from May's 3.3 percent. Welch said the May to June uptick is typical.  

"Likely contributors for the unemployment rate increase could be school employees being laid off for the summer recess,” Welch said. “Also students finishing school and entering the labor force during the summer recess."