California’s Economy Has Been Pinched by Unemployment from the New York Times. The Golden State’s jobless rate remains stubbornly high.
Tech layoffs. Hollywood strikes. Rural joblessness.
For much of the past year, key parts of the California economy have looked a lot like our winter weather: dreary.
While the state’s economy has long outpaced the economies of most nations, the unemployment rate in California has risen significantly over the past year.
The state’s 5.1 percent unemployment rate in December was a percentage point higher than a year earlier, and well above the national rate of 3.7 percent. The only state faring worse than California was Nevada, at 5.3 percent, according to recently revised figures from the Bureau of Labor Statistics.
(The national rate rose to 3.9 percent in February; state-by-state figures for January and February aren’t available yet.)
California’s unemployment rate is usually above the U.S. average because of its young and fast-growing work force, but in the early part of the pandemic recovery, the gap was smaller — 4 percent in California in May 2022, compared with 3.6 percent in the nation.
Since then, a wave of deep cuts has hit workers at several big tech companies, and entertainment-related employers have only slowly begun to rebound from the Hollywood strikes last year. The unemployment rate in Los Angeles County is around 5 percent.
In more rural stretches of the state, including Imperial County along the Mexican border, where agriculture is a key economic engine, the unemployment rate is in double digits — roughly 18 percent, up 3.1 percentage points from a year earlier.
The state has seen job growth in education and health care, and in the leisure and hospitality industries.
But Kevin Klowden, an executive director at the Milken Institute, an economic research organization in Santa Monica, said Hollywood would take months, if not years, to return to the way it looked before the strikes. Some restaurants and other small businesses that relied on workers involved in television and film production will probably never reopen, he said.
US economy adds 275,000 jobs in February (from the Financial Times): The US economy added 275,000 jobs in February, beating expectations, but January’s strong number was sharply downgraded.
And from the New York Times: Economists are trying to gauge whether forecasts of a slowing labor market were mistaken or just premature. For now, gains are consistent and strong.
If the economy is slowing down, nobody told the labor market.
Employers added 275,000 jobs in February, the Labor Department reported Friday, in another month that exceeded expectations even as the unemployment rate rose.
It was the third straight month of seasonally adjusted gains above 200,000, and the 38th consecutive month of growth — fresh evidence that four years after going into pandemic shutdowns, America’s jobs engine still has plenty of steam.
“We’ve been expecting a slowdown in the labor market, a more material loosening in conditions, but we’re just not seeing that,” said Rubeela Farooqi, chief economist at High Frequency Economics.
Previously reported figures for December and January were revised downward by a total of 167,000, reflecting the higher degree of statistical volatility in the winter months. That does not disrupt a picture of consistent, robust increases.
At the same time, the unemployment rate, based on a survey of households rather than businesses, increased to a two-year high of 3.9 percent. The increase from 3.7 percent in January was driven by people losing or leaving jobs as well as those entering the labor force to look for work.
A Key Inflation Measure Moderated in January (From the New York Times): The Federal Reserve’s preferred inflation measure continued to cool on an annual basis, even as a key monthly gauge nudged higher.
A measure of inflation closely watched by the Federal Reserve continued to cool on an annual basis in January, the latest sign that price increases are coming back under control even as the economy continues to chug along.
The Personal Consumption Expenditures price index climbed 2.4 percent last month compared with a year earlier. That was in line with what economists had forecast and down from the 2.6 percent December reading.
After stripping out food and fuel costs, which can move around from month to month, a “core” price index climbed 2.8 percent from January 2023. That followed a 2.9 percent December reading.
Still, the closely watched core measure climbed more quickly on a monthly basis: It picked up by 0.4 percent, quicker than a 0.1 percent December pace. That was the fastest pace of increase since January 2023, and it came as service prices continued to climb at a rapid clip.
Fed officials aim for 2 percent price increases, so today’s inflation rate remains elevated. Still, it is much lower than this measure’s roughly 7 percent peak in 2022. In their December economic projections, central bankers predicted that inflation would cool to 2.4 percent by the end of the year.
Officials have recently been able to dial back their campaign to slow the economy because price increases have been swiftly cooling.
Powell says rate cuts likely this year but more data needed (from the LA Times and Associated Press) By Christopher Rugaber-Chair Jerome H. Powell reinforced his belief Wednesday that the Federal Reserve will cut its key interest rate this year but said it first wants to see more evidence that inflation is falling sustainably back to the Fed’s 2% target.
Powell’s comments to a House committee largely echoed those he made at a news conference Jan. 31 . Since then, however, government reports have shown that inflation picked up from December to January , and hiring accelerated. Those signs suggested that the economy remains hot and that the process of further slowing inflation will probably be uneven from month to month.
But Powell did not express concern about the inflation data. Instead, he noted that according to the Fed’s preferred gauge, inflation “has eased notably over the past year” even though it remains above the central bank’s target.
On the first of his two days of semiannual testimony to Congress, Powell also suggested that the Fed faces two risks: cutting rates too soon — which could “result in a reversal of progress” in reducing inflation — or cutting them “too late or too little,” which could weaken the economy and hiring. The effort to balance those two risks marks a shift from early last year, when the Fed was still rapidly raising its benchmark rate to combat high inflation.
The financial markets are consumed with divining the timing of the Fed’s first cut to its benchmark rate, which stands at a 23-year high of about 5.4%. A rate reduction would probably lead, over time, to lower rates for mortgages, auto loans, credit cards and many business loans.
Most analysts and investors expect a first rate cut in June, though May remains possible. Fed officials, after meeting in December, projected that they would cut rates three times this year.
In his remarks Wednesday, Powell offered no hints on the potential timing of rate cuts. Wall Street traders put the likelihood of a rate cut in June at 69%, according to futures prices, up slightly from about 64% a week ago.
The Fed chair added that with the economy healthy and unemployment low, “we think we can and should be careful” in deciding when to cut the central bank’s benchmark rate.
Powell also underscored that the Fed’s policymakers believe they are done raising rates, which are probably high enough to restrain the economy and inflation. He stressed that the Fed’s rapid rate hikes in 2022 and 2023 haven’t led to higher unemployment. And under questioning, he added that he foresees little chance of a recession, which a year ago was widely predicted by most economists.
From the Financial Times: ECB holds rates at record high but cuts inflation forecast- The European Central Bank has left interest rates on hold despite cutting its forecasts for inflation and growth, as the eurozone’s ailing economic outlook failed to convince policymakers that price pressures had been tamed.
Consumer Spending (from Peter Coy and the New York Times): If there is a recession in the United States this year, it probably won’t be because consumers spontaneously run out of spending power. Consumers are in reasonably good shape, although life is getting harder for the most vulnerable groups.
Households aren’t “the place to look for economic weakness,” Michael Pearce, the deputy chief U.S. economist for Oxford Economics, a forecaster, told me last week.
True, it’s easy to find worrisome statistics. The personal saving rate fell in December to 3.7 percent of disposable personal income, which except for a dip in 2022 was the lowest since 2008.
But the news isn’t all bad. The Federal Reserve staff economists estimating the remaining amount of “excess” savings — greater-than-usual savings that households accumulated during the pandemic, when there was lots of stimulus money coming in and relatively few opportunities to spend it.
Measuring excess depends on defining normal, which is tricky. The Fed study found that if you define normal using the saving pattern for the entire period since 1950, the excess has been more than used up. But going by the pattern since just 1990, households are still sitting on excess savings equal to 4 percent of U.S. gross domestic product, leaving them with plenty of spending power.
Even if you could manage to get a precise figure for excess savings, you might not learn much about the economic outlook, because the relationship between saving and spending is loose. “The saving rate doesn’t have this magnetic pull to some threshold that we can consider normal saving,” John O’Trakoun, a senior policy economist at the Federal Reserve Bank of Richmond, told me last week.
Wealth also matters for spending. The rise in the stock market and housing market has made people feel richer, which has prompted them to open their wallets.
Not everyone has benefited equally or consistently from rising wealth, though. Since 2022 there have been some big changes in who wins and who loses. The middle fifth of households by income had the biggest wealth gains from the start of the pandemic through the third quarter of 2022, but almost no gains since.
Households headed by people under 40 had the biggest percentage gains in wealth over the first period, but very little since. That makes sense: sense: Younger families were more likely to get stimulus payments during the pandemic. But they’re less likely to own houses and stocks, so they haven’t benefited as much from the gains in those asset markets.
Families will be more likely to cut back on their spending if their net worth isn’t rising the way it used to. People hoping to buy a first home have already been squeezed by a combination of high prices and high mortgage rates.
One sign of stress on households is an increase in the rate of delinquencies on credit cards and auto loans among lower-income households. The good news is that households with annual incomes of less than $50,000 still aren’t using as much of their available credit on average as they did before the pandemic hit, as the following chart, based on Bank of America internal data, shows.
Lower-income households spend more of their income on rents, health insurance and other necessities, while upper-income households spend relatively more on financial services and what economists call owner-equivalent rent, which is an estimate of what homeowners would pay for where they live if they were renters.
A chart showing difference in spending shares by income on a variety of expenditures such as rents, health insurance and electricity.
Pearce used the data on spending patterns to create price indexes for each income group — that is, the amount of inflation each group encounters. Then he applied those to the earnings of each income group. He found that since the pandemic began, inflation-adjusted earnings grew the most for the lowest quarter of households by income and the least for the highest-earning quarter.
It’s a mixed picture. Lower-income households haven’t fully shared in wealth gains from housing and stocks, but they’ve more than held their own in incomes adjusted for inflation. On the whole, it looks like the American consumer is in reasonably healthy condition.
C.D.C. Shortens Isolation Period for People With Covid (From the New York Times): Americans with Covid or other respiratory infections may return to daily activities if they don’t have a fever and their symptoms are improving.
Americans with Covid or other respiratory infections need not isolate for five days before returning to work or school, the Centers for Disease Control and Prevention said on Friday, a striking sign of changing attitudes toward the coronavirus.
People with respiratory illnesses may resume daily activities if they have been fever-free for at least 24 hours without the aid of medications and if their symptoms are improving, agency officials said.
Acknowledging that people can be contagious even without symptoms, the C.D.C. urged those who end isolation to limit close contact with others, wear well-fitted masks, improve indoor air quality and practice good hygiene, like washing hands and covering coughs and sneezes, for five days.
The guidelines apply to Covid, influenza and respiratory syncytial virus, among other respiratory ailments, which should make it easier for people to comply, Dr. Mandy Cohen, the C.D.C.’s director, told reporters on Friday.
COVID-19 vaccine recommendations have been updated as of February 28, 2024, to recommend adults ages 65 years and over receive an additional updated 2023-2024 COVID-19 vaccine dose. The CDC page will be updated to align with the new recommendation. Learn more.