California unemployment soars in January

SACRAMENTO " California's unemployment rate jumped to 10.1 percent in January, the state's first double-digit jobless reading in a quarter-century.

The jobless rate announced Friday by the state Employment Development Department represents an increase from the revised figure of 8.7 percent in December. It also is 2.5 percentage points higher than the national jobless rate in January of 7.6 percent.

A year ago, California's unemployment rate was 6.1 percent. Since then, steep declines in the construction, finance, information and retail industries have put thousands out of work.

"The recession is worse than we thought," said Howard Roth, chief economist at the state Department of Finance.

The number of people without jobs in California soared to more than 1.8 million, up 754,000 from January 2008.

Roth said he believed the construction and finance industries had bottomed out, only to see losses increase in both. He said he hopes for marginal improvement in the economy over the second half of the year.

Stephen Levy, senior economist for the Palo Alto-based Center for Continuing Study of the California Economy, said the last time California's unemployment topped 10 percent was June 1983.

"They're confirming what we already know, which is that we're in a very, very deep recession that is going to last for many months," Levy said.

Nonfarm payroll jobs declined by 494,000, or 3.3 percent, from a year ago, according to the state's survey of California businesses.

A separate federal survey of households showed a drop of 283,000 jobs from December, or a loss of 437,000 jobs from January 2008.

Of California's jobless, nearly 1 million had been laid off while about 127,000 left their jobs voluntarily. The others were new to the labor market or were trying to re-enter.

In a statement, Gov. Arnold Schwarzenegger said the unemployment numbers released Friday are "a sobering reminder" that rejuvenating the state's economy should be government's top priority.

The two-year state budget package approved last week includes economic stimulus measures such as a $10,000 tax credit for buyers of new homes and tax credits for movie studios and multistate corporations. It also relaxes environmental rules for some construction projects and provides incentives for small businesses that hire more workers.

"It is extremely important that we put people back to work. This is why we negotiated all the extra pieces in the budget," Schwarzenegger said during a Friday campaign event in Fresno to promote six budget-related measures that will appear on the May 19 special election ballot.

Home builders are looking to the homebuyer tax credit, which takes effect Sunday, to start pulling the industry out of its slump.

"Hopefully, that will give a shot in the arm for the housing markets that have been so depressed in the last two years," said Tim Coyle, senior vice president of the California Building Industry Association.

The industry typically expects to build about 200,000 housing units a year. In 2008, it built just 66,000, resulting in roughly 300,000 lost jobs, he said.

The last time California's unemployment rate was over 10 percent was during a 12-month period that ended in June 1983.

Construction, manufacturing, transportation, trade, information, and professional and financial services were among the sectors posting the biggest losses, according to the figures released Friday. They lost a combined 86,700 jobs over the past month. Adding the hospitality and leisure industries, those sectors lost 537,000 jobs from a year ago.

The information sector posted the largest decline in the past month, shedding 27,700 jobs, most of them in the motion picture and sound industries. The construction trades posted the largest year-over-year decline on a percentage basis, losing 130,800 jobs or 15.5 percent.

Education and health care services saw job increases.

"It looks like California's precipitous manufacturing decline continues," said Gino DiCaro, spokesman for California Manufacturers and Technology Association. "Since January 2001, we have now lost close to 500,000 manufacturing jobs in California. That's a quarter of California's industrial base, and those are simply high-wage jobs that California can't afford to lose."

DiCaro said his group has studied private sector vs. public sector job growth since 2001 and found that the private sector accounts for just 15 percent of new jobs.

"California's got a lot of work ahead of it to improve the job climate in the state," he said.

Job losses could be on the horizon for state government workers as the Schwarzenegger administration looks to trim costs further.

The governor's office has said the state must reduce its payroll by 10 percent, which could include laying off up to 10,000 state employees. Cities and counties across California also are laying off public employees.

"The government sector has certainly slowed down, where before it was one of the top three job sectors," said Jodi Chavez, a Newport Beach-based vice president at the national staffing firm Ajilon.

She said her agency is seeing increased hiring among beer and wine distributors and manufacturers of video games.

"I think families are spending more time at home than going out," she said.

January's double-digit unemployment figure could be revised downward as additional information comes in, said Kevin Callori, spokesman for the Employment Development Department.

The rising jobless rate is putting a strain on the state fund that pays out unemployment insurance.

The Employment Development Department said 717,525 Californians were receiving unemployment insurance benefits in January, up from 480,858 at the same time last year.

In January, California began borrowing from the federal government to keep its unemployment insurance fund solvent. The employment department projected the state will need to borrow $2.4 billion through year's end and $4.9 billion in 2010 if the state doesn't adjust its benefits or taxes on employers.

One potential bright spot in Friday's report: New jobless claims in California fell to 75,514, down from 87,979 in December.