California's July Unemployment Rate Is Lowest in Nearly 50 Years

California's unemployment rate fell to 3.9% in July, the lowest point since 1976, as employers in the nation's most populous state continued to defy expectations by adding 84,800 new jobs.

New numbers released Friday by the state's Employment Development Department, showing month-over-month job growth in 17 out of the last 18 months, suggest that California's labor market has so far been largely immune from record-high inflation nationwide and a cooldown in the housing market, both of which have prompted warnings of an economic slowdown.

Ten of California's 11 industry sectors had job growth in July, led by big gains in computer systems' design, advertising, security services and health care. While California makes up 11.7% of the nation's civilian labor force, the state accounted for 16.1% of all new jobs in the U.S. last month, according to Friday's report.

More than 18.5 million Californians were employed in July, an increase of nearly a million people since July 2021, according to the report. Meanwhile, the number of unemployed Californians in July — 758,700 — was down by some 648,000, as compared to last year.

That job gain in the state comes despite a decline in both job postings and sales of single-family homes — a major driver of California's economy — the latter slowing 14.4% in July compared to June, and down 31.1% from a year ago, according to the California Association of Realtors. California's housing market reflects an overall slowdown in home sales nationally, which declined in July for the sixth straight month.

“It's certainly surprising,” former EDD Director Michael Bernick said of California's job gains. “It goes against all the other economic indicators.”

California lost more than 2.7 million jobs in just the first two months of the pandemic in 2020, when Gov. Gavin Newsom issued the nation's first statewide stay-at-home order that forced many businesses to close.

It has taken more than two years for the state to get most of those jobs back, and July's upbeat jobs report indicates the state has recovered 97.3% of those pandemic job losses.

Now an attorney with the Duane Morris law firm, Bernick — who closely tracks California's labor market — said he suspects California is still being propped up by billions of dollars from federal stimulus spending and the state's budget surplus. The recently passed Inflation Reduction Act in Congress will also send more money to the state, lowering some prescription drug costs while helping millions pay their monthly health insurance premiums.

But, Bernick cautioned, “That is not going to continue forever.”

The biggest reason for the decline in California's unemployment rate is the large number of new jobs added in July. But another factor is that an estimated 23,400 people stopped looking for work in July, reducing the state's labor force. Some industries are continuing to see an acute labor shortage, mostly in restaurants and hotels, according to Sung Won Sohn, an economics professor at Loyola Marymount University.

“I think the labor force will go up in the future because people need to earn extra income to beat inflation," he said. “We are already seeing so-called gig employment rising because some people are holding two or three jobs. The fear of an oncoming recession, if we are not in one already, will cause people to look for work.”

California's budget includes $9.5 billion in refunds to about 23 million people, something Newsom touted Friday when boasting about the low unemployment rate.

“We have historic reserves and we’re putting money back in peoples’ pockets as we continue to lead the nation’s economic recovery,” he said in a news release.

Across the country, unemployment rates dropped in 14 states in July, rose in three, and stayed the same in 33, according to the U.S. Bureau of Labor Statistics.

California's unemployment rate is slightly lower than the one in Texas, but still higher than those in Florida and Alabama — all Republican-led states whose leaders Newsom has publicly feuded with in recent months.