On paper, the decline in California’s unemployment rate this spring should be encouraging. By May, it had dropped from 5.5 percent in December to 5.3 percent. However, if you spend even a short while examining the underlying data, the narrative ceases to resemble recovery. It begins to appear as though it has vanished.
The percentage of adults who are either employed or actively seeking employment, or the labor force participation rate, decreased from 62.6% to about 62.0%. Until you translate that into people, it sounds like a rounding error. It isn’t. This indicates that about 200,000 Californians chose not to be counted as either employed or job seekers. Before they completely stopped working, 75% of them were employed.
The way labor statistics take in such a change is almost clinical. According to Chas Alamo, an analyst with the state’s Legislative Analyst’s Office, the decline in the unemployment rate was primarily due to a decline in active participation rather than an increase in employment. The formula stops counting people as unemployed once they stop looking. The rate increases. It doesn’t always make the person better.
Sitting with that for a moment is worthwhile because it goes against what most of us assume when we see a declining unemployment rate. We believe it will result in higher salaries, more hiring, and greater self-assurance. Occasionally, it indicates the opposite—that a portion of the population has simply stopped being seen by the system.
This is supported by data from household surveys. More than 150,000 Californians have lost their jobs since January, with 44,000 fewer people working in May alone. It’s not a blip. It’s a slow, steady leak that has been going on for months, focused on industries like technology and entertainment that, depending on the quarter, have either been booming or bleeding for the majority of this decade.
Where did everyone go, then? That’s the more difficult question, and to be honest, no one has a clear solution yet. For years, California has been losing citizens to states like Texas and Arizona; this trend predates this most recent decline but most likely hasn’t stopped. Others may have quietly transitioned into gig or informal work, which doesn’t always show up neatly in survey data, aged into retirement, or given up on finding a job after months of rejection.
Additionally, given the timing, it is impossible to overlook the immigration angle. According to Census Bureau data examined by the Pew Research Center, over 1.2 million immigrants nationwide disappeared from the U.S. labor force between January and the end of July. Nearly one-fifth of the workforce in the country is made up of immigrants, and this percentage is even higher in the construction, farming, and service sectors—all of which are crucial to California’s economy. It’s possible that some of California’s unaccounted-for employees fit the same national trend: individuals who left the workforce due to fear, uncertainty, or pressure from law enforcement rather than voluntarily.
The discrepancy between perception and reality is what sets this moment apart from previous slowdowns. A declining unemployment rate can be cited by Newsom’s administration. The fact that fewer Californians are employed at all is a point of contention. Both claims are technically accurate, which contributes to the difficulty of telling this story clearly because there isn’t a single antagonist or headline figure that accurately depicts the state’s labor market.
As this develops, it’s difficult to ignore the question of how much of this is merely transient conflict and how much is a structural change that the state hasn’t yet fully addressed. The economy of California has withstood downturns in the past. However, a declining labor force, even one that is only slightly declining, usually leaves a lasting impact, such as fewer tax filers, lower consumer spending, and fewer job fairs. The figures will continue to fluctuate. It remains to be seen if those behind them will return.
