California’s Entrepreneurship Among the Ruins

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

I’ve discussed California’s entrepreneurship and the current recession in several articles over the past year (here, here, & here).

This past week brings new data on business incorporations during the recession from Ms. Philly Crosby of the Secretary of State’s office. These data continue to show the strength of California’s entrepreneurs.

Below is a summary of the new business incorporations from 1999-2009.

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Who Will Get the Disappearing California Construction Jobs?

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

Construction employment in California has been in free-fall since reaching its high water mark in August 2006, as shown in the table below.

Over the past year, federal Stimulus infrastructure projects in California have moved forward and hired construction workers. This is particularly true of transportation projects, for which Caltrans is closely tracking payroll data on employees, hours, and total payroll.

What is not widely recognized, though, is that public infrastructure jobs are only a small part of total construction jobs in California. These public infrastructure jobs are the higher paid construction jobs, but amount to around 10% of construction employment.

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Fresno: Job Training When Unemployment is 18.5%

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

The most recent state unemployment numbers (February 2010) show a number of California counties with unemployment rates soaring near to or over 20%: Imperial, 27.2%, Colusa, 27.6%, Merced, 22%, Tulare, 18.7%, and Fresno, 18.5%.

To an extent these rates are misleading. Even when the state economy is running smoothly, these counties, with significant agricultural employment, have unemployment rates over 10%. With the agricultural base, a level of seasonal unemployment is built into the local economy.

Yet, as Fresno County indicates, the current unemployment even in agricultural counties is a far different situation than in previous years. Tim Sheehan notes in a recent Fresno Bee article that the current unemployment in Fresno County (with a labor force of 441,300, the largest of the agricultural counties) is the highest unemployment rate in 17 years. The total number of unemployed is 81,800, the largest number ever.

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Staffing Companies: Canary in California’s Employment Mines?

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

Contingent employment in California—employment outside of the traditional employer-employee relation—has been growing for more than two decades in California. This growth has included increases in independent contractors, self-employment, employment leasing, and most of all, in staffing employment, which regularly totaled over 420,000 payroll jobs in California until this Great Recession.

The chart below compiled with the assistance of Mr. Spencer Wong of EDD, shows the changes in staffing employment from October 2001 through October 2009. Staffing company employment in California—both jobs within the staffing companies and jobs in client companies—is included in the “Employment Services” sub-sector category of the EDD monthly labor reports. Since the sub-sector numbers are not seasonally adjusted, the chart below focuses on the same month, October, for each of the following 9 years.

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California Employment Free Fall and Where We’re Heading

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

EDD released its “benchmarking” of 2009 payroll employment recently, and the results were dramatic. The monthly payroll surveys had indicated that payroll jobs declined during 2009 by 579,836 jobs. However, a fuller review of payroll data by EDD indicated the true job loss was 818,400 jobs—an additional 338,000 jobs lost. .

Taking this recent information, the chart below shows the payroll job numbers in California by sector in December 2006 and in December 2009—a period in which the state payroll jobs decreased by 1,400,000 jobs.

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An Employment Director Who Failed-And Lessons For California Today

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

In the Spring of 1975 as a graduate student at Oxford University, I took the train to London one Saturday to attend a session of national Labor Party officials. Michael Foot, was the national Employment Secretary at the time in the Labor government of Harold Wilson, and one of the main speakers.

I thought of this Saturday long ago as I read that Michael Foot died Wednesday at the age of 96. I don’t recall anything of that session other than Foot’s oratory. He was a brilliant orator, as even his many opponents in the Labor Party, such as Dennis Healy, acknowledged. At one point in he declaimed of an initiative he regarded as misdirected, “Do men gather grapes of thorns or figs of thistles”. Indeed.

Foot had a lengthy career in government and politics, starting in 1934 when he joined the Labor Party. He served in Parliament from 1945 to 1955, and later from 1960 through 1992. He actually led the Labor Party from 1980 through 1983, when he lost in a landslide to Margaret Thatcher and was replaced by Neil Kinnock.

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One Employment Sector That is Growing in California

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

One of the most significant but least-recognized parts of California employment is the workforce in California’s skilled nursing facilities. There are around 1300 licensed skilled nursing facilities in the state, employing more than 130,000 workers at the end of 2009. This skilled nursing facility workforce is one of the few sectors in California that has been growing in recent years and is projected for continued employment growth.

Nobody knows more about this workforce and how it has developed since the 1970s than Ken Merchant. For several years, Ken was the director of education and training for the California Association of Health Facilities (CAHF) , the main association representing long term care employers. Since 2005, Ken has been working with local Workforce Investment Boards, employers and unions to train new Certified Nurse Assistants (CNAs) and assist incumbent CNAs to higher-paying positions in the industry. Recently, I was able to sit down in Sacramento with Ken and get his thoughts on the present skilled nursing facility workforce, the growth in number of employees and wages, and the opportunities for career mobility within the industry.

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Bob Marr and the Future of State Employment

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

I miss Bob Marr, and I think about him during the current discussions of state public sector employees.

Bob worked at the state Employment Development Department (EDD) from 1964 until a few months before his death in May 2005. Bob was a state employee for over 40 years.

I met Bob in 1982 when I was heading a community job training agency, the San Francisco Renaissance Center. Bob worked with then-Director Kaye Kiddoo on job training initiatives. Bob and I corresponded on job training issues over the next 16 years, until I became EDD Director in early 1999.

Bob was the opposite of a nine-to-five man. You could find him in the Department at all hours. For many years he worked on a manual typewriter, and only in the late 1990s converted to a computer. Bob knew every job training and job creation program since 1964, and the lessons they could yield for practitioners and policy makers.

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California’s Next Retraining Economy

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

One little-recognized impact of this Great Recession is the hastening of California’s next retraining economy.

For years, even before the Recession, there was enormous movement, resembling Brownian motion, of California workers among jobs. In the 1990s and early 2000s when the economy was running well, and unemployment below 6%, the number of job turnovers, of hirings and separations, totaled over 40% of total employment per year in California, as elsewhere in the United States.

What has changed in the Recession is the shift from movement due to voluntary job changes (“quits” in Bureau of Labor Statistics terms) to movement due to job layoffs/discharges. Nationwide, the quit level, the measure of workers’ willingness to change jobs, was 1.8 million in September 2009, 43% lower than its peak in December 2006. At the same time, the discharge level for September 2009 was 2.1 million, 35% higher than its trough in January 2006.

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California’s Employment Growth in 2010

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

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.

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