Calif. unemployment rate falls below 9 percent

SACRAMENTO, Calif. (AP) -- California's unemployment rate fell to 8.6 percent in May, marking the first time in nearly five years the jobless number has dipped below 9 percent, the state Employment Development Department reported Friday.

The drop in May — a decrease of 0.4 percentage points from 9 percent in April — puts California's unemployment rate at the lowest level since November 2008.

While California's rate continues to remain 1 percentage point above the national average of 7.6 percent, the state's improving labor market has narrowed the gap.

According to the U.S. Labor Department, California and West Virginia reported the largest declines in unemployment among all states. California also has seen the largest drop in unemployment among the states over the past 12 months.

State officials reported a non-farm jobs gain of 10,800 during May for a total gain of more than 767,000 since the economy began to rebound in February 2010.

Roughly 1.6 million Californians remain unemployed, down 364,000 from May of last year.

California hit a high of 12.4 percent unemployment for much of 2010 but has seen steady job gains since then. It now is tied with New Jersey for the sixth highest unemployment rate in the nation, according to the Labor Department. Nevada has the highest rate, followed by Illinois and Mississippi, Rhode Island and North Carolina.

In another indication of the state's reviving financial fortunes, the state Department of Finance on Friday released its monthly bulletin that showed tax collections in California running 1 percent, or nearly $1 billion, ahead of projections for the fiscal year.

The department said housing starts have accelerated while the prices of existing homes for sale have been rising.

The state reported there were nearly 18,000 fewer Californians receiving unemployment insurance benefits in May compared to the previous month, even though the number of new claims rose by 3,500.

The number of Californians holding jobs continues to grow, but the recent gains may be deceiving, said Michael Bernick, a former Employment Development Department director who is now with the law firm Sedgwick LLP in San Francisco. The latest figures show 17 million Californians holding jobs in May, up 529,000 from the same period last year.

"The increase is not in payroll jobs; it's people who say they're employed as either independent contractors or self-employed," Bernick said. "Now, that may be very positive in the sense of new business formation, but it may be a lot of these people who are marginally holding on."

The state also saw the greatest monthly gains in the leisure and hospitality industry, which tends to have low-wage jobs, he said.

Six other categories, including manufacturing, trade, financial activities, professional services, government, and education and health added 37,400 jobs. Mining, construction and information were down 26,600 jobs over the month.

The gains vary greatly among regions. While the Northern California coastal county of Marin had the state's lowest unemployment rate of 4.5 percent, Imperial County in the southeast corner of the state held the highest at 22.8 percent.

California's economy still has a way to go before it can match the state's historic low unemployment rate of 4.7 percent in January 2001, the middle of the tech boom.