March was something of a hold-steady month for California’s labor market. The unemployment rate was unchanged, at 5.3%; employers added 28,300 jobs. On an annual basis, employment was up 1.2%—the same rate as a year ago. Concerns loom, however, as to why California’s jobs picture is not as strong as that of other states or the nation. Nationally, unemployment is lower at a steady 3.8%, and jobs are growing faster (1.9% over the past year). While differing performance across sectors explains the divergence, California’s regions all fared quite differently.
Regional Growth
Jobs in the Sacramento metro area grew substantially faster (3.1% over the past year) than in other parts of California—at almost triple the statewide pace—and much faster than in prior years. The San Joaquin Valley metros came in with the second fastest job growth (2.4%) and the Orange metro had the third largest (1.9%). In both regions, average annual growth this year was faster than between 2019 and 2023.
While the Inland Empire grew jobs faster than the state overall, its pace has fallen off that of recent years. The Bay Area, Los Angeles, and San Diego metros all underperformed the statewide job growth rate, but their average growth was a bit better than in the prior four years.
Rising Unemployment
Regional job trends generally correspond with how unemployment has changed in the past year. While it has increased in all metros, unemployment has risen most in the Bay Area and San Diego, where it increased by 0.9 percentage points since last March. The Inland Empire had the second largest unemployment increase (0.8 percentage points), corresponding to its slowdown in adding jobs. Though these jumps are concerning, unemployment rates remain highest in the San Joaquin Valley metros (8.9% in March) and in regions outside major metros (7.3%).
Regional Declines
California’s divergence from national trends in the past two years comes largely from the information sector, which has taken major hits. Information jobs are heavily concentrated in both Los Angeles and the Bay Area; these two regions have seen the largest declines. Los Angeles lost 30,600 jobs (or 14.3%) during the last year while the Bay Area lost 22,200 (or 9%). For comparison, nationally the sector fell by just 1% in the last year.
The administrative services sector shrank more in California than in the US, and is the second sector contributing the most to our differential trend. This change appears to be driven by declines in Los Angeles and San Diego, where employment fell 3% from a year ago and job growth decelerated—especially in San Diego where jobs had grown on average 4% between 2019 and 2023. Nationally, the sector declined by only 1%.
Strong Sectors
Let’s zoom into the regions where job growth accelerated the most. During the past year, the Greater Sacramento region saw faster job growth in health care, construction, education, and government. Both health care and government are key sectors for the region, contributing 16.9% and 24.3% of jobs in March 2024, respectively. In the Orange metro, a strong push came from job gains in arts and entertainment, which grew 10.6% (compared to 0.1% growth in the four years prior); health care and government also played an important role. In the San Joaquin Valley, the same sectors plus administrative services overperformed relative to their performance between 2019 and 2023.
In all, across the state’s major metros, health care drove job growth in the past year, which also outpaced recent trends. Construction jobs strengthened job growth in the Sacramento, Inland Empire, and Orange metros. Lastly, in many regions, educational services contributed to substantial job growth.
Soft Sectors
Employment growth in the transportation and warehousing sector—which had driven California’s job growth, especially in the Inland Empire and the San Joaquin Valley—has downshifted. Transportation jobs in these regions had grown about 11% annually, on average, between 2019 and 2023 but declined by 1% in the past year. To a lesser extent, the accommodation and food services sector was another source of job losses in these regions.
Additional sectors contributed to regional softening in the labor market. For example, in the San Diego, Bay Area, and Los Angeles metros, professional and scientific service jobs were down in the last year after averaging annual growth rates between 1.4% and 2.7% in the four years prior.
California is a complex economy made up of wide-ranging sectors and regions with varying strengths and challenges. While statewide indicators reflect our general economic direction, strengths and challenges at the regional and sector level shape the day-to-day economic realities for individual Californians.
