A new analysis reveals that while public-sector and government-supported jobs have increased, California's labor market overall is struggling, with a notable decline in private-sector jobs since their peak post-pandemic.

The state Legislative Analyst’s Office reviewed employment data from the U.S. Bureau of Labor Statistics up to April and found that California's private-sector industries have lost a total of 340,000 jobs since their peak a few years ago. The technology and finance sectors have been hit hardest, with the information sector—home to major employers like Google, Apple, Facebook, and Disney—experiencing a 16% decline since its peak. From over 531,000 jobs in July 2022, the sector has lost 98,000 positions. The financial sector, which peaked at 500,000 jobs in December 2021, has seen an 8% decrease, losing 43,000 jobs.

Additionally, business services, manufacturing, and transportation and warehousing industries each experienced a 3% job loss since their peaks. California's unemployment rate stands at 5.2%, the highest in the nation for the past four months.

Conversely, the health care and social service sectors have added 240,000 jobs since September 2022. This growth includes positions in private sectors such as dental offices, child care centers, and vocational rehabilitation services. However, as these sectors are closely tied to government spending, the analysis groups them with public-sector jobs, which have also increased by 120,000 over the same period. The analysis, based on 12.5 million private-sector jobs as of April, shows a total of 5.5 million jobs split between public and publicly supported sectors.

Chas Alamo, principal fiscal and policy analyst for the Legislative Analyst’s Office, noted that the job market has been weak since late 2022. He advised caution in interpreting monthly job reports due to discrepancies between preliminary reports and subsequent revisions based on unemployment insurance data.

California's reliance on personal income tax revenue makes the nature of job gains or losses crucial. Brooke Armour, president of the California Center for Jobs and the Economy, pointed out that while any job growth is positive, the state is losing high-wage jobs that support the budget and gaining lower-wage jobs in hospitality and services, which she believes has eroded middle-class employment.

The California Center for Jobs and the Economy, part of the California Business Roundtable, which includes top executives from major employers, supports Alamo’s analysis but attributes significant tech job losses to the industry's pandemic hiring boom rather than a broader trend. Armour described the tech sector’s job losses as a correction and expressed concern about tech companies making investments outside of California, even though they continue to operate within the state.

Regarding potential impacts of the state’s budget deficit on public-sector job growth, Alamo indicated that the public sector also includes jobs funded by federal sources. He anticipates that employment in health care and social services will likely continue to grow despite budget challenges.