Welcome to California’s Unemployment Belt
(Bloomberg Opinion) -- Look at a list of the metropolitan areas with the highest unemployment rates in November (the Bureau of Labor Statistics released the numbers last week), and something stands out. Most of them are in inland California!
This is curious because, overall, the California economy seems to be in pretty good shape. Payroll employment growth was slightly above the national average last year (through November), and unemployment, at a seasonally adjusted 4.1 percent in November, wasn’t much above the national rate of 3.7 percent. The booming San Jose and San Francisco metropolitan areas have unemployment rates of 2.4 percent and 2.5 percent, respectively. Of the state’s other big metropolitan areas (estimated population of 1 million or more as of July 2017) San Diego is at 3.2 percent, Sacramento 3.5 percent, Riverside-San Bernardino 3.9 percent and Los Angeles 4.2 percent.
Given that all the California metros on the above table have big agricultural sectors, I wondered if the lack of seasonal adjustment in the metropolitan area data might be the issue. But no, that doesn’t seem to be it. In most of the high-unemployment California metros, unemployment tends to bottom out in September and peak in February (in the El Centro area, aka the Imperial Valley, the nation’s main producer of winter vegetables, the bottom is usually in April and the top in August), which makes the November number one of the least seasonally skewed of the year. Also, while the metro area unemployment rates for November are preliminary, model-based estimates that shouldn’t be taken as gospel (I took the liberty of throwing Kokomo, Indiana; Rockford, Illinois; and Panama City, Florida, off the table because they showed huge unemployment-rate increases from October to November that seemed more likely to reflect statistical error than reality), the presence of so many inland California metros on the list indicates that they’re not flukes.
So what is going on with them? Well, these tend to be places with undereducated labor forces — most rank near the bottom nationwide in the percentage of adults with high school or college degrees — where unemployment rates have long been very high. In the El Centro area, the rate hit 31.9 percent in the summer of 2011, and it was above 20 percent for all but three months of the 1990s. Metropolitan Fresno, Hanford-Corcoran, Merced, Modesto, Stockton-Lodi and Yuba City all actually experienced their lowest unemployment rates on record (with the record going back to 1990) in September.
That’s great news! So is the fact that per capita personal income in all the high-unemployment California metropolitan areas has increased relative to the national average over the past decade. Then again, incomes in all of them have lost ground relative to the Bay Area of San Jose and San Francisco, and the gap between inland unemployment rates and coastal ones remains large, especially in the northern part of the state. The national dynamic of superstar metropolitan areas continuing to pull away from the laggards has been playing out with a vengeance in California, with the vicious twist that there they are often right next to one another. The state knows how to produce good jobs along the coast, and new housing inland, but it has long struggled to bring the two together. The Modesto and Stockton metropolitan areas — both adjacent to the Bay Area — lead the nation in the share of commuters who spend 90 minutes or more traveling to work, according to a recent Apartment List analysis of Census Bureau data, but that’s not a satisfactory solution.
Historian Victor Davis Hanson, a resident of the Fresno metropolitan area, has one of his occasional essays decrying the dystopia that he perceives California to be in National Review this month. I don’t buy all his hyperbole or his diagnoses, but I do think he’s right that the “near medieval asymmetry” between coastal California and the inland regions poses big problems. After eight fat years of economic growth and technocratic good governance under outgoing Governor Jerry Brown, I’m also guessing that this will become increasingly apparent in the coming years.
That’s a lot from the Upper Midwest! Also, every single metropolitan area in New Hampshire and Vermont (which has only one metropolitan area) makes the list. Not all of these are boomtowns: The BLS estimates that the labor force shrank over the 12 months ending in November in metro Rochester, Minnesota; Burlington, Vermont; Jefferson City, Missouri; Fargo and Grand Forks, North Dakota; and Madison and La Crosse, Wisconsin, meaning that the low unemployment rates in part reflect the unwillingness of would-be workers to move to these (mostly cold) places. Maybe more inland Californians should consider it, though.
Since 2011 the BLS has also produced seasonally adjusted estimates for metropolitan areas, but since it still focuses on the unadjusted numbers in its data releases I figured I should do the same.
The Yuma, Arizona, metropolitan area, which is just across the Colorado River, is also a big winter vegetable growing region.
Why are there 19 metro areas in the first chart and 22 in the second? Because the BLS reports lots ofidentical metro-area unemployment rates and I needed to make the cutoff somewhere.
Some already have. I wrote a column in October about California dairy farmers moving to the Upper Midwest.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
©2019 Bloomberg L.P.