CA comeback suffers setback

July 4, 2013

By Wayne Lusvardi

California experienced a sharp setback in the third week of June — despite all the media talk about an economic comeback.  According to the U.S. Department of Labor, California had an increase of 15,341 claims for unemployment insurance claims in the week ending June 22, mainly due to service worker layoffs.

California’s sudden increase in unemployment insurance claims runs against the national trend of claims declining. The U.S. Department of Labor reported that seasonally adjusted unemployment insurance claims declined nationwide by 9,000 for the week of June 22.  The unadjusted data indicates claims fell by only 1,589 however.

California unemployment insurance claims represent 56 percent of the layoffs of the worst five states for the third week of June 2013; 39 states saw an improvement in claims and 14 states experienced a rise in claims.  The largest increases in initial claims for the week ending June 15 were in California (+15,341), Pennsylvania (+4,882), Florida (+4,850), Michigan (+1,114), and Maryland (+1,065).  The largest decreases were in Illinois (-3,401), New York (-2,090), Georgia (-1,893), Missouri (-1,591), and Tennessee (-1,542).

The long term U.S. trend has been a flattening of the downturn in unemployment insurance claims. The sharp upward spike in unemployment claims in California in mid June does not reflect a strengthening economy or a trickle-down effect.

Service sector hit hardest

California’s sudden rise in unemployment claims was all attributed to service worker layoffs.  Other state unemployment insurance claims were attributed to a variety of industries.

Neither the U.S. Bureau of Labor Statistics nor the California Employment Development Department provides a clear definition of what the service worker sector of the economy is.  However, service workers are generally considered to be: Attendants (hospital and other institutions, professional and personal service, including nurses aides and orderlies), barbers, char workers and cleaners, cooks (except household), counter and fountain workers, elevator operators, firefighters and fire protection workers, guards, doorkeepers, stewards, janitors, police officers and detectives, porters, servers, amusement and recreation facilities attendants, guides, ushers, public transportation attendants, and kindred workers.

Loss of low end jobs, surplus of state revenues

The loss of low-end service worker jobs comes at a time when state budget coffers are basking in a budget surplus.  Depending on who is counting, California is projected to have a $1.2 to $4.4 billion budget surplus this year. Apparently what media considers a “comeback” is when the state is flush with cash from tax increases — even as unemployment may be rising.

Also, California’s Unemployment Insurance Fund has been running a $10.3 billion deficit based on borrowed funds from the U.S. government. California does not expect to be able to pay this back until 2020. Unemployment insurance is a tax on employers and is not funded out of the state general fund.

Things are getting better in California for government. But there hasn’t been as much improvement for those semi-skilled people at the bottom of the occupational ladder.

Except for growth in government and, of course, in high-tech Silicon Valley companies, California’s “comeback” has been greatly exaggerated.

Unemployment Claims by State — Third Week June 2013

State	Change in Unemployment Weekly Claims	State Supplied Comment
STATES WITH INCREASE IN UNEMPLOYMENT CLAIMS
California	+ 15,341	Layoffs in services industry
Pennsylvania	+ 4,882	Layoffs in transportation, hotel & food service, finance & insurance
Florida	+ 4,850	Layoffs in agriculture, construction, manufacturing, wholesale trade, retail trade, service industries
Michigan	+ 1,114	No comment
Maryland	+ 1,065	No comment
STATES WITH DECREASE IN UNEMPLOYMENT CLAIMS
Illinois	– 3,401	Fewer layoffs in construction, manufacturing, administrative & support industries
New York	– 2,090	Fewer layoffs in construction, hotel & food service, finance and insurance
Georgia	– 1,893	Fewer layoffs in manufacturing, administrative support, health care, social assistance, & hotel and food service
Missouri	– 1,591	Fewer layoffs in transportation & warehousing, construction, hotel & food service, health care and social assistance
Source: U.S. Dept. of Labor, Unemployment Insurance Weekly Claims Report, June 27, 2013