This column extends and corrects a previous piece from August 7, 2024, on recent trends in California job growth. This update shows different job growth trends among the major Bureau of Labor Statistics (BLS) jobs data produced from surveys; discusses why the trends in the data may be so different and what that means for job growth; and summarizes findings from a recent analysis by California’s Legislative Analyst’s Office (LAO) that compares job growth differences between private-sector industries and government- and publicly supported sectors (healthcare and social assistance). It also discusses jobs data whose measurements are more precise than in either survey, though these data are finalized only through the fourth quarter of 2023.
One takeaway is that California’s job growth is almost certainly higher than presented in the August piece because the total jobs data used there, and which are produced by the BLS from their household survey, are almost certainly too low, potentially because of how the Census Bureau produces state population estimates between decennial census years that in turn are used to construct the total jobs data. Another takeaway is that the state should be concerned about jobs. Using the more precise data, California ranked 50th in job growth in 2023. Moreover, the LAO study shows that job growth has been narrowly concentrated in government, healthcare, and social assistance, with other industries posting losses.
The August piece presented Bureau of Labor Statistics (BLS) data drawn from its survey of a sample of households that estimates total employment in the state, including the self-employed, household workers, unpaid family workers, and some smaller categories, along with payroll workers. These data were in some cases incorrectly identified or interpreted in the earlier column as private business employees rather than as total employed.
The total jobs survey indicates that California’s total employment grew by about 156,000 between January 2022 and June 2024. Over this period, the government sector added about 149,000 jobs. The government jobs data were drawn from a BLS survey of a sample of nonagricultural establishments. There are thus two major BLS jobs surveys: one survey of households that is used to construct total jobs, and another that surveys nonagricultural establishments and that is used to construct all nonagricultural payroll jobs, including government payroll jobs and payroll jobs in other industries.
Typically, job growth in these two surveys move together very closely. However, nonagricultural payroll jobs grew much faster than total jobs in the same period, rising by about 3.9 percent, representing 672,000 more jobs over that period, compared to 156,000 more total jobs from the household survey.
I had missed this large divergence in the previous piece, which is important because these two employment surveys present different pictures of California’s labor market and job growth, with the total jobs survey showing weak growth, and the nonagricultural payrolls survey showing strong growth. Unfortunately, they are not easily compared, because the total jobs survey is broader in scope and both are subject to errors in sampling.
Given the large divergence in trends between the two surveys, I therefore examine data from a government census of jobs, the Quarterly Census of Employment and Wages. There are two benefits to using this measure to compare to the BLS total jobs survey. One is that it should be very accurate, covering the near universe of workers within the state unemployment insurance (UI) systems. Another is that it includes some agricultural workers, perhaps 50 percent, which improves its comparability with the BLS total jobs survey, and agriculture is a sizeable sector in California. However, it will still miss those who are not in the UI system, including the self-employed, unpaid family workers, some household workers, and some other smaller categories.
This UI-covered jobs census is released quarterly, though there is a six-month reporting lag. These data are revised at least twice after their initial release. The latest finalized data are through the fourth quarter of 2023. Therefore, I compare the UI-covered jobs census data to the BLS total jobs household survey data between the first quarter of 2022, and the fourth quarter of 2023. During this period, California UI-covered jobs grew about 2.6 percent, while in the same period total jobs from the BLS household survey cited above and used in the earlier piece grew by about 0.5 percent.
Since non-UI-covered jobs are a small percentage of total jobs, it is extremely unlikely that the difference in these two growth rates is due just to declines in non-UI jobs. This indicates that the BLS household survey used to create their total jobs numbers, and which was used in the earlier piece, is understating job growth. The UI-covered jobs census data is clearly preferred. The drawback to using the UI-covered jobs census, however, is that we won’t have final 2024 numbers until September 2025 due to the reporting lag and data revisions.
The unusual divergence between these job measures suggests that some unusual factor is depressing the BLS household survey job numbers. That factor may be higher immigration. The reason boils down to the fact that immigrants show up in the jobs census once they are hired (assuming they are in a UI-covered job). However, there tends to be a lag in how changes in immigration are captured by the Census Bureau between decennial census years. Because of relatively high immigration in recent years, the Census Bureau’s population estimate for California (and other states) may be too low. And since the census population numbers are used by the BLS to construct the total jobs count from the sample of surveyed households, the BLS total jobs growth used in my earlier piece is almost certainly too low.
Interpreting BLS total jobs growth as too low is certainly better news for California’s job market. However, there are still reasons for concern. The jobs census data show that California was 50th in job growth in 2023, measured as 12-month percentage changes at the quarterly frequency.
Another reason for concern is a California LAO report that studies California job growth between 2022 and April 2024. It focuses on private-sector job growth, which is defined as jobs not in government or in industries significantly supported by the public sector (healthcare and social assistance).
The LAO reports “broad weakness” in the industries outside those government and publicly supported sectors. They find job growth of 361,000 in the government and publicly supported category but find a loss of 154,000 jobs in all other industries between September 2022 and April 2024.
Compared to the same sectors at the national level, the LAO reports sizable growth rate differences between January 2022 and April 2024 in the following industries: information (California -12%, national +1%), finance (California ‑8%, national +2%), real estate and leasing (California 0%, national +7%), and professional services (California +1%, national +7%).
There are implications from this discussion for California’s future economic growth. One is the impact of immigration: Nearly half of California’s Fortune 500 companies were founded by an immigrant or a child of an immigrant. Further, about 42 percent of California businesses are started by immigrants, compared to 25 percent nationwide.
Notable immigrant California entrepreneurs include Elon Musk (South Africa, founder/cofounder of Tesla, PayPal, SpaceX), Sergey Brin (Soviet Union, cofounder of Google), Andrew Grove (Hungary, cofounder of Intel), and Jawed Karim (Germany, cofounder of YouTube). The history of California’s immigrant entrepreneurs goes back to the time of the Gold Rush and German immigrant Levi Strauss, who commercialized the practice of using rivets to increase the durability of pants, a process that became highly valued by gold miners, creating the now iconic blue jeans that bear his name.
Just a handful of business visionaries can move the needle; imagine how different life would be if those individuals had not become entrepreneurs. National immigration reform that increases immigrant entrepreneurs could be a game-changer for California. While that reform is out of California’s hands, there are state-level policy changes that could enhance California’s economy.
California has the third-worst business tax climate, according to the Tax Foundation, the second-worst regulatory climate, according to the Cato Institute, and high living costs that reflect limited residential construction. The state’s median home price is now about $890,000. The median monthly rent on available units, per Zillow, is about $2,800, an amount that requires an annual household income of $112,000, assuming the standard 30 percent rent-to-income ratio.
California has many obvious and remarkable advantages that provide a foundation for economic growth. Policy changes that improve its tax, regulatory, and cost-of-living competitiveness could raise its growth prospects in an environment where job growth is lagging the national average and the growth that is occurring is concentrated in government and publicly supported sectors.
