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Calif. jobless hits double digits
Crumbling housing and consumer sectors propel unemployment rate to 10.1%, the highest in 25 years.
February 27, 2009: 4:08 PM ET
SAN FRANCISCO (Reuters) -- California's unemployment rate rose to 10.1% in January, its highest level in a quarter century, as recession tightened its grip on the most populous U.S. state.
Weakness in the housing and consumer sectors helped drive the jobless rate up from a revised 8.7% in December and 6.1% in January 2008 and to above the national average in January of 7.6%, state officials said Friday.
Economist Jon Haveman of the consulting firm Beacon Economics said he expects California's jobless rate will climb to the mid-10% range and settle there for much of this year.
"It's headed north," Haveman said, noting his outlook reflects Friday's report that the U.S. economy in the fourth quarter shrank at a 6.2% annual rate, the deepest contraction since early 1982.
"Things are just simply worse out there than anticipated," Haveman said. "The outlook for this quarter has certainly got to be awful and we likely won't see positive GDP growth until the first quarter of 2010, and that's when we would expect the unemployment rate to turn around" in California.
Consumer spending across California has plunged in the wake of Wall Street's turmoil, and payrolls have been thinned at a rapid pace in recent months. The state, the world's eighth largest economy, is also suffering from a prolonged housing downturn.
"There is continued weakness in housing-related sectors and we're also seeing weakness in consumer-related sectors," said Kevin Callori, a spokesman for the state's Employment Development Department. "The credit crunch is making consumers less confident, so that's affecting businesses in wholesale and retail trades."
"Basically about a third of the losses (over the past year) have been in consumer-oriented industries," Callori said. "Another third have been in housing and housing-related industries like construction and financial services."
State officials said California lost 79,300 nonfarm payroll jobs in January from December and a total of 494,000 nonfarm jobs from a year earlier, or 3.3% of the state's nonfarm payrolls.