California reported another excellent jobs report on Friday, with the unemployment rate down to its lowest level since before the epidemic, but the euphoria was eclipsed this week by the clearest indicators yet of a shaky economy that might soon enter a slump.
In May, companies added 42,900 new jobs, bringing the jobless rate down to 4.3 percent. This is the lowest rate since February 2020, when the nation’s most populous state closed numerous enterprises due to the coronavirus and lost more than 2.7 million jobs.
According to the Workforce Development Department, California has already restored 93 percent of the employment it lost at the outset of the epidemic. However, more indicators of concern emerged this week, with inflation reaching a 40-year high, asset values plummeting, and the Federal Reserve imposing the largest interest rate rise in nearly three decades.
Effects of Real estate and capital gain reliance in California
Given the state’s reliance on real estate and capital gains — money gained from the sale of various asset classes, including stocks — such changes are expected to have a greater influence on California’s economy than in other states.
‘I think things are going to become worse, not better from here on out,’ said Sung Won Sohn, an economics professor at Loyola Marymount University.
The Federal Reserve raised interest rates for banks that lend money to the other banks on Wednesday. This rate has an influence on other interest rates in the economy, notably mortgage rates.
While California’s median home price rose to $898,980 in May, the monthly interest rate on a 30-year term mortgage reached 5% for the first time since April 2010. As a result, 9.8 percent fewer properties were sold in May relative to April, a 15.2 percent decrease from the previous year. According to the California Association of Realtors, it was the lowest amount of sales since June of 2020.
“We’re starting to see evidence of a more balanced housing market, with fewer houses selling over list price and properties being on the market a bit longer than in prior months,” said California Association of Realtors President Otto Catrina.
Food, gas, and other products prices rose 8.6 percent nationwide in May, the most since 1981. California retailers, notably general merchandise stores, shed the most employment in May, more than any other industry, indicating that consumer demand may be decreasing.
“My suggestion to job searchers or anyone who is still on the wings or seeking work is to attempt to get back in now.” “It’s going to grow more difficult,” said Michael Bernick, the California Workforce Association’s research director, and an attorney.
with the legal firm Duane Morris.
Great sales report
According to Rachel Michelin, president, and CEO of the California Merchants Association, retailers are still reporting great sales — it’s just that more of those purchases are taking place online rather than in-store. She stated that merchants are still battling to employ people, implying that the layoffs in May were the consequence of company owners reacting to the labor crisis by installing additional self-checkout stations.
However, she stated that retailers are keeping a careful watch on inflation, adding that many are still dealing with supply chain concerns.
As of today, Michelin remarked, “we’re not as worried about total retail sales.” “However, I believe that when you looked at some of the major national merchants decreasing their demands, We are ready for an economic slump, which will undoubtedly result in even more job losses in the retail sector.”
Gov. Gavin Newsom signed a $5.5 billion tax relief for most businesses earlier this year. On Friday, he presented $178.2 worth of tax credits for 16 firms that have agreed to create 7,600 new jobs and invest $2 billion in private capital. The tax credits are part of California Competes for the program, which was launched in 2013 with the goal of enticing firms to remain in California.
The neutral Legislative Analyst’s Office has questioned the value of California Competes for the program, claiming that measuring performance is difficult.