In the depths of any major recession, it appears to job seekers and others concerned about unemployment, that the economic malaise will never lift, that hiring will never pick up, that job openings will never materialize. But hiring does pick up, as it did in our previous major California recessions in the early 1980s and early 1990s, and as it will in this Great Recession, beginning in 2010.
This Great Recession hit California with an unprecedented force and speed in late 2007, resulting in very rapid job shedding in finance, construction, and retail. This speed of job loss reflected several forces in the California economy over the past two decades: breakthroughs in technology for conveying and processing information, the decline of the employer-employee relation, and the emergence of global markets and magnification of economic shifts. For a time, it appeared that these same forces might lead to a recovery far more rapid than followed previous recessions.
Now it appears that the job recovery will be slower. The trauma of this Great Recession is far deeper than previous recessions. Speak with California employers, large and small, and they will say how reluctant they are to take on employees. They are uncertain of the national and state economies; they are uncertain about their own business sector; they want to avoid the psychological and financial trauma of laying off workers.
The state job numbers for the past two months do not show an economy in which job openings have increased significantly. The job numbers for October showed a job gain of net 25,700 jobs, the first net job gain in 18 months. However, in November, the state again showed a net job loss (though a more modest loss than previous months) of 10,200 jobs. The unemployment rate did decline in November from 12.5% to 12.2%, but this decline was due mainly to the decline in adults counted as being in the labor force (actively looking or work) rather than to job gains.
Still, there are several reasons to think that hiring will pick up, if slowly, in California in 2010. Construction and retail, two of the sectors hardest hit, are no longer in free fall. Construction employment in California declined from over 930,000 jobs in December 2006 to 615,000 jobs in October 2009. But the past few months, the job losses have been smaller, and in November construction actually gained 1200 jobs. Retail employment lost 127,000 jobs in the 10 months between November 2008 and September 2009, but also has stabilized in recent months.
Further, the federal Stimulus funds are finding their way into the California economy, providing some employment stability to key sectors. The Stimulus is not creating a large number of jobs in California directly (ignore the official statistics). But it already has prevented the employment impacts of state and local government deficits; and it will be having its greatest employment impacts in key sectors over the next six to twelve months. California, for example, received $2.5 billion in highway funds, and has identified over 900 projects for funding. Caltrans, managing 86 projects, is furthest along, and expects to have contracts awarded in all projects by February. The other projects are locally managed, and around 425 should have awards by February. The job impacts of these projects will hit mainly in 2010, and into early 2011.
The key to California job growth, of course, will be private sector job growth, and particularly the entrepreneurship of its citizens. The federal Bureau of Labor Statistics (BLS) maintains data on business growths and deaths, and for the most recent quarter March 2009, the BLS identified 19,506 private sector firms started in California during the quarter. Mark Lacter of LABizObserved recently noted that this number of private sector start-ups was below the roughly 25,000 private sector start-ups launched each quarter during the recession of 2001, and Lacter wondered if California entrepreneurship might be in decline. But there is another way to look at this. The current Great Recession is far worse than our previous recessions. To start a business in 2009 meant not only great risk-taking, but going against all common wisdom and economic logic. It is these illogical entrepreneurs that is California’s most valuable resource.