Vol. 2, No. 2
Issued June 23, 1999

Next publication date: Sept. 15, 1999

In This Issue

• Nonfarm Employment Growth Nearly 3 Percent in Last Year
• Statewide Unemployment Down From Last Year
• Exports Continue to Fall
• Inflation Up Slightly, But It Remains Low

Nonfarm Employment Growth Nearly 3 Percent in Last Year
Nonfarm employment in California grew at a nearly 3 percent rate for the year ending in March 1999, continuing the state's economic rebound. This growth rate is slightly lower than that recorded in 1997 and 1998, but the rate remains strong by historical standards (Figure 1). This slightly lower growth rate has resulted largely from lower employment growth in Santa Clara County, where the growth rate for nonfarm jobs fell from 4.7 percent in 1998 to 0.3 percent in 1999. (See RAND California Employment and Unemployment Statistics for employment statistics on California and its regions.)

Figure 1
Nonfarm Employment, March Each Year

Some weakness is also apparent in the manufacturing sector, particularly in nondurables and in the San Jose, Sacramento, and Los Angeles MSAs. Service sector growth rate was 4.8 percent, nearly twice that of all industries combined. Service sector jobs continued their expansion in large part due to growth in and the creation of business service, such as management consulting and computer firms. Construction sector job growth also continued, registering 8.4 percent for the year ending in March. The construction and service sectors combined now account for 35 percent of California's jobs and 64 percent of California's 385,000 new jobs since the first quarter 1998. Many of the construction jobs are in the northern part of the state. For example, the Sacramento MSA has experienced an 11.2 percent increase in this sector from the same time last year.

Statewide Unemployment Down From Last Year
Statewide unemployment remains at 5.9 percent, down from 6.1 percent in March 1998. However, the unemployment rates in many Central Valley communities remain high (Figure 2). This situation has been more or less constant for the past year. The San Jose MSA shows the most significant increase of metropolitan areas, up 0.7 percent from 1998 to 3.5%.

Figure 2
Unemployment Rates, Selected Cities

Exports Continue to Fall
Exports from California Customs Districts fell 4.4 percent for the year ending in March. This decline can be attributed in large part to continued trade weakness in Asia and and recent weakness in Latin America. The decline was the greatest in San Francisco, where exports fell 6.4 percent from 1998 (Figure 3).. Merchandise exports rose from San Diego, due in large part because a small share of that district's trade is with Asia. Trade with Mexico was particularly strong, with the exception of the San Francisco Customs District. (See RAND California Foreign Trade Statistics for more details.)

Figure 3
Merchandise Exports by Customs District, First Quarter, 1998-1999

Inflation Up Slightly, But It Remains Low
The inflation rate in California has paralleled that of the United States for much of the last decade. Recently, however, the rate in California has begun to exceed the national rate, rising to 2.9 percent in the last year. During the same period, the U.S. rate was 1.7 percent, up only 0.3 percentage points.

Much of the increase in the inflation rate in California, particularly the San Francisco Bay Area, can be traced to high housing costs. Both California and the Los Angeles region have seen a gradual increase in housing costs in the past five years. In 1997, housing prices abruptly began to rise sharply in the Bay Area and continue to rise at a rapid rate today. CPI-U housing prices are shown in Table 1 for California, Los Angeles, and the San Francisco Bay Area.

Table 1
Changes in CPI-U Housing, Selected Areas

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