California Unemployment
For most of the last 30 years, California's unemployment rate has been higher than that in the U.S. as a whole. This is due in large part to the state's sensitivity to past economic shocks: during the recessions of the early 1970s and early 1990s, the unemployment rate rose more in California than in the nation as a whole and remained at elevated levels for several years.
These two recessions had not only a cyclical component but also an important structural component in California, which was due to the adverse impacts of federal defense spending cuts on the state's aerospace industry. By contrast, the early 1980s recession had a limited structural component for the state, so California's unemployment rate tracked the national rate very closely in the 1980s.
Since the latest recession began in 2001, California's unemployment rate has increased by about the same amount as the national unemployment rate. Within the state, the increase in unemployment has been largest in the San Francisco Bay Area, where the plunge in demand for tech products has hit hard; unemployment has risen by about 4 percentage points, twice that observed in the state or the nation. Within the Bay Area, the impact has been most severe in the San Jose metro area, where unemployment hovered around 8% (not seasonally adjusted) at the end of 2002—a startling increase from the low of 1.3% recorded at the end of 2000.
By contrast, in Southern California, which has a relatively diversified economy, the unemployment rate has increased only by a little over 1 percentage point. Although unemployment rates in the two regions have converged (Figure 1), the burden of rising unemployment has been shared unevenly within the state.