Hiring is off to a good start in 2024. According to last week’s jobs report, California added 58,100 new jobs in January, the strongest monthly gain since April 2022. The gains were broad-based, with only a few industries shedding a low number of jobs. But while California’s economy is showing signs of resilience, there are also areas of concern: revised employment data indicates that last year’s job trends were weaker than originally estimated, and the latest data from January shows a small increase in the state’s unemployment rate.
Early in the year, the Bureau of Labor Statistics revises its survey of business establishments to ensure it remains representative of the labor market (based on the “complete” count in unemployment insurance records). This results in revisions to job counts for prior years. Recent benchmark revisions have reflected lingering impacts of the pandemic on employment data collection.
This year’s revisions paint a slightly weaker picture of the state’s labor market than did the initial estimates: average monthly growth in 2023 decreased from 25,900 to 12,900 jobs, and December’s year-over-year change in total nonfarm jobs was revised from a gain of 311,000 (or 1.7%) to a gain of 154,900 (or 0.9%).
The revised estimates show that between January and July of last year the state did not gain as many jobs as initially estimated: instead of an average monthly gain of 32,500 jobs, the state lost an average of 400 jobs per month. This more accurate data may help explain the pessimism many Californians express about the state’s economy.
However, the revised data for the last five months of 2023 suggest a turnaround. They show stronger average monthly job gains than previously estimated (31,600 instead of 16,700). Employment counts for 2022 were also adjusted significantly, especially for the last quarter. As of December 2023, employment was 1.5% above its pre-pandemic level—not 2.9% higher, per initial estimates.
Here is how the changes played out across sectors:
The wave of tech layoffs that began to make headlines in the first few months of 2023 shows up more prominently in these revised data; the largest changes were in the information and the professional and technical services sectors—where most tech jobs are counted. The revised year-over-year decline in employment in the information sector at the end of 2023 was 12.3%, more than double the original estimate of 5.9%. Revisions in the professional, scientific, and technical services sector were less dramatic but still important: while the previously estimates showed tepid growth of 0.9%, revised estimates show employment decreasing 1.5%. The state lost 96,300 jobs in these two sectors last year, instead of 22,700.
Transportation and finance/insurance sectors also shrank in 2023—both by about 2 percentage points more than initially estimated.
Leisure and hospitality job growth was not as strong as initial estimates suggested. The accommodation and food service sector grew 2.1% in revised data, not 5.2%, adding 34,300 jobs, not 84,100. Employment growth in the arts and entertainment sector was adjusted only slightly, from 4.5% to 4.3%.
The strongest year-over-year performance was in the educational and health care sectors; revised growth was 23% higher than initially estimated (184,700 versus 150,600). The revised data show no change in employment in the wholesale sector between December 2022 and December 2023 (instead of a 2% decline), and slightly higher job growth in construction and other services than earlier estimates indicated.
In January 2024, estimates show some reversal of recent downward job trends. The largest job gains have come in six sectors: health care, government, wholesale trade, administrative services, professional services, and information. The latter three sectors—which experienced losses in 2023—will be ones to watch.
However, the January 2024 unemployment rate also inched up slightly, from 5.1% in December to 5.2%. California has the second-highest unemployment rate in the nation and was one of four states to see an increase in the unemployment rate in January. The revised annual average rate for 2023 was only slightly higher—4.7% vs. 4.6%—but unemployment was higher in 8 of the 12 months of 2023 than was originally estimated. The September and October rates underwent the most change—0.3 percentage points. The gap between California’s unemployment rate and the national rate widened slightly, from an average of 1 percentage point in the first eight months of 2023 to 1.4 percentage points from September 2023 to January 2024.
Even though revised data show California experienced weaker job growth in 2023 than originally estimated, labor market indicators are strong by historical standards. January’s strong report shows further improvements, especially in sectors such as tech and administrative services that struggled in 2023—a potentially reassuring sign. But given the growing gap in unemployment between California and the rest of the nation, policymakers will want to keep a watchful eye on emerging data.
