NationalNews Gazette

 

(05-22) 11:31 PDT SAN FRANCISCO -- California's unemployment rate fell slightly to 11 percent in June, but the state lost 63,700 payroll jobs, in a pair of mixed signals that suggest the labor market continues to weaken but at a slower pace.

Friday's report from the state Employment Development Department said California's jobless rate fell from 11.2 percent in May despite fewer people collecting paychecks.

"What this means is that things are worsening, but not at the same rate," said Chris Thornberg with Beacon Economics.

The unemployment rate and payroll job counts are based on two different surveys, and most economists think the payroll numbers are a better indicator of labor market conditions because they are derived from a larger sample.

Over the past 12 months, California has lost 706,700 payroll jobs. The Employment Development Department estimates that almost 2.1 million Californians are now unemployed.

Howard Roth, chief economist for the state Department of Finance, said job losses and other factors have hit the state so hard that he expects personal income will drop 1 percent in California in 2009 - which would be the first such statewide decrease since 1938.

"It's really quite extraordinary," he said. "This is a really bad recession."

The U.S. unemployment rate was 8.9 percent in June. California has the fifth-highest rate in the nation. Economists attribute the state's higher rate to its greater exposure to the housing bubble.

Focusing on the Bay Area, the Employment Development Department said unemployment rates dropped slightly throughout the region in June. But the payroll survey offered mixed signals.

The San Francisco metropolitan area, which includes San Mateo and Marin counties, continued to have one of the strongest job markets in the state. Unemployment in the three counties fell to 8.3 percent in June from 8.6 percent in May, and they gained some jobs thanks to leisure and hospitality and federal government hiring.

"Jobs in the West Bay appear to be stabilizing," said Ruth Kavanagh, labor market analyst for the Employment Development Department.

In the Oakland metropolitan area, made up of Alameda and Contra Costa counties, the jobless rate fell to 10.1 percent in June from 10.3 percent in May. But the two counties lost payroll jobs, the department said.

The San Jose metropolitan area, which includes Santa Clara and San Benito counties, has the Bay Area's weakest labor market. It lost payroll jobs even as unemployment edged down to 10.9 percent in June from 11.1 percent in May, the department said.

Economists expect the recession to bottom out later this year and think the output of goods and services will gradually start to recover. Even so, they predict that the job market will remain weak as employers put off hiring until they are confident of the recovery.

"There are some hopeful signs," said Stephen Levy of the Center for Continuing Study of the California Economy.

Levy said strong demand for foreclosed homes may depress prices but start to build a bottom for the housing market and a recovery. He also said very little of the federal stimulus money has reached the economy, and when it does, that will deliver a jolt.

But any improvement will come too late for Bay Area resident Daniel Neu, who lost his job as a commercial real estate appraiser in December and has been unable to find work. He plans to relocate his wife and infant son in June to North Carolina, where they will move into a house his deceased father left him.

"I'm purging and packing," said Neu, who came to the Bay Area in 1979. "I have to go someplace that's cheaper to live."

E-mail Tom Abate at tabate@sfchronicle.com.