California growth continues in March despite labor shortage

New numbers released Friday by the U.S. Bureau of Labor Statistics and the California Employment Development Department show the state has recovered 2,463,400 of those jobs lost during the pandemic, or 89.2%. California accounted for 14% of job growth nationally in March as the state has posted gains in 13 out of the past 14 months.

"Today's report is more good news for California's continued economic recovery, representing thousands of new opportunities for workers throughout the state," Newsom said.

The state's enormous job growth has been driven by increased demand from consumers, who have more money to spend thanks to billions of dollars in state and federal government spending during the pandemic. Much of that government support has ended, which could signal a tightening in the job market in the coming months.

"Everyone else is going to say this is a great job report, and it is strong. But I think it's important to recognize in part what it's built on, and that bill is going to come due," said Michael Bernick, a former director of the Employment Development Department who closely monitors California's labor market as an attorney with the law firm Duane Morris.

Business owners have consistently reported difficulty hiring workers to keep up with demand. The shortage has driven up wages for workers, gains that have been offset by rising inflation that have increased costs for food, gasoline and other products.

California's labor force — defined as the number of people who either have a job or are looking for work — has grown by nearly 350,000 people in the past year, typically a strong sign of economic recovery. But the state's labor force is still nearly 400,000 people short of the pre-pandemic high, Bernick said.

"Despite the healthy March report, the main problem remains labor shortages. Some workers are in no hurry to return to work," Sung Won Sohn, a professor of economics at Loyola Marymount University, wrote in an email analyzing the new jobs numbers. "The pandemic has also caused a Great Migration from metro areas to the suburbs and the countryside. In the process, the link between jobs and where they live have weakened contributing to the relatively low labor participation rate."

While California has outpaced the rest of the country in job growth, it also continues to have an outsized number of people filing for unemployment benefits. Last week, California — which accounts for about 11% of the nation's labor force — made up more than 20% of new unemployment claims nationally.

Still, California's unemployment rate dipped to 4.9% in March as 10 of the state's 11 industry sectors added jobs for the second month in a row. The biggest gains again came in the leisure and hospitality industry, which had the heaviest losses during the pandemic as state rules prevented people from gathering in public places like restaurants and bars.

Professional and business services added the second most new jobs, driven by increases in accounting, tax preparation and bookkeeping services as people got ready to file their 2021 income tax returns ahead of Monday's filing deadline.