Vol. 2, No. 1
Issued Mar. 17, 1999

Next publication date: June 1, 1999

In This Issue

• California Added Nearly 450,000 Jobs in 1998
• Job Growth Lower in the North, Higher in the South
• Construction Continues to Expand
• Foreign Trade Stalls Across the State

California Added Nearly 450,000 Jobs in 1998
The California economy continued to expand at a rapid rate in 1998, despite some sluggishness in exports and manufacturing. Continued strength in construction, services, and other sectors led the state to its best performance since the late 1980s. The statewide unemployment rate fell to 5.5 percent at the end of 1998, down slightly from 5.7 percent in December 1997 (Figure 1). Unemployment rates in most areas were relatively unchanged or down slightly. However, unemployment rates in some Central Valley areas remain in double digits.

Figure 1
Unemployment Rates, December 1998

The state added nearly 450,000 jobs during calendar year 1998, the largest employment gain for the state during any year this decade (Table 1). About one-half of these job gains occurred in the services sector (Figure 2). Other sectors showing strong gains include construction, retail, and government. Mining was the only sector to show a loss in employment. However, this sector accounts for only about 25,000 of the state's 13.8 million jobs. (See RAND California Employment and Unemployment Statistics for employment statistics on California and its regions.)

Table 1
Annual change in California Non-farm Jobs, 1991-1998

Figure 2
California Change In Employment By Sector, Dec. 1997-Dec. 1998

This increase in service jobs is the continuation of a more secular trend in the state economy. Since 1990, the number of service sector jobs has increased by almost 30 percent. Similarly, the number of construction jobs, led by a rebound in residential and non-residential construction, particularly in the San Francisco Bay Area, is up about 15 percent (Figure 3). Manufacturing remains down somewhat, largely due to residual effects from aerospace downsizing in Los Angeles County. Similarly, employment in Finance, Insurance, and Real Estate (FIRE) has changed little since 1990. Mining employment has fallen about 35 percent since 1990.

Figure 3
California Year-End Employment By Sector, 1990-1998

Job Growth Lower in the North, Higher in the South
About 41 percent, or 181,000 of the net new nonfarm jobs in California occurred in the five-county Los Angeles Region. (See major regions for MSA and region definitions.) About one-half of these occurred in Los Angeles County, although the growth rate there was the lowest in the region at 2.0 percent (Figure 4). The highest growth rate in the Los Angeles Region was in Riverside MSA (Riverside and San Bernardino counties) at 4.6 percent.

Nonfarm employment growth rates in the San Francisco Bay Area during the year were much slower, particularly in the San Jose MSA (Santa Clara County), where the annual rate was just 1.0 percent. Growth in this region overall has slowed to about one-half the rate in 1997. Employment growth was the highest in the Santa Rosa MSA (Sonoma County), while the rate in the Oakland (Alameda and Contra Costa counties) and San Francisco MSAs (San Francisco, San Mateo, and Marin counties) was 2.4 percent.

Nonfarm job growth also was significant in San Diego County (3.5 percent), the Bakersfield MSA (Kern County) (3.7 percent) the Fresno MSA (Fresno and Madera counties) (3.2. percent), and the Sacramento MSA (Sacramento, Placer, and El Dorado counties) (3.5 percent). The growth rate overall for California was 3.2 percent.

Figure 4
Annual Increase in MSA Nonfarm Employment, 1997-1998
(annual growth rates show in parentheses)

Construction Continues to Expand
A main reason for the continued recovery of the state economy is the strength of the construction industry. As noted above, in the last year, construction employment statewide rose by about 60,000, a 9.8 percent increase. Much of this was due to continued strength in residential and non-residential construction. The number of new housing units statewide rose from 111,700 in 1997 to 125,400 in 1998. Virtually every area of the state experienced an increase in residential construction. Growth was particularly strong in Riverside-San Bernardino MSA (Riverside and San Bernardino counties), Sacramento MSA (Sacramento, Placer, and El Dorado counties), and some Bay Area counties. New housing units fell in the San Jose MSA (Santa Clara County) and the Orange County MSA. (For detailed construction statistics at the county level, see RAND California Construction Statistics.)

Figure 5
New Housing Units by MSA

Non-residential construction also rose in California in 1998, climbing 20.6 percent to $14.8 billion. Nearly one-half of this increase occurred in the Los Angeles-Long Beach MSA (Los Angeles County). With the exception of the San Francisco and San Jose MSAs, all other major regions showed an increase in new non-residential construction valuation.

Figure 6
Non-residential Construction Valuation by MSA

Foreign Trade Stalls Across the State
Merchandise exports showed weakness across the state in the fourth quarter of 1998, particularly from the San Francisco Customs District, where exports fell more than 15 percent compared with 1997. Exports from the Los Angeles and San Diego Customs Districts also fell. This is significant since exports from San Diego until recently had continued to grow. This weakness from San Diego may indicate weakness in Latin American trading partners. Exports for the U.S.fell slightly in the final quarter. (See RAND California Foreign Trade Statistics for more details.)

Figure 7
Merchandise Exports by Customs District, Fourth Quarter Change, 1997-1998

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