JOBS: Riverside, San Bernardino counties see worst unemployment in 13 years

Region's builders, retailers slash payrolls; economist sees 'too much debt'

By CHRIS BAGLEY - Staff Writer | Friday, August 15, 2008 10:18 PM PDT ∞

The region's jobless rate rocketed to its highest level in 13 years last month as hardware stores and construction companies continued to slash payrolls in response to the cratering housing market.

Unemployment in the two-county region of Riverside and San Bernardino rose to 8.9 percent in July from an upwardly revised 8.1 percent in June, 7.5 percent in May and 6.5 percent a year ago, the state Employment Development Department reported Friday. That is the highest rate since September 1995, when Southern California was still recovering from severe cutbacks in the defense industry. About 162,000 people in those two counties were out of work last month.

School districts led the job cuts, due partly to the annual lull between retirements and new hires. But most industries in the private sector also trimmed their payrolls. Retail stores and builders also continued to shed jobs at a time of year when they traditionally have added workers. Building-supplies stores in the region have cut 1,800 jobs ---- about 15 percent of their work force ---- in the last year, including 200 jobs in July, according to the state agency.

The statewide jobless rate of 7.3 percent for July was also a drastic jump from a revised 7 percent rate in June, the state agency reported. Hardest hit were areas where economies had relied on housing and construction. Unemployment in San Diego County was a relatively modest 6.4 percent, though that rate has also risen dramatically this summer, from 5.5 percent in May.

"It all depends on your exposure to housing," said Christopher Thornberg, a partner at Beacon Economics.

But the key factor in the housing bubble, that too many buyers borrowed beyond their ability to repay, has affected other industries, too, Thornberg said. From 2001 into 2006, consumers financed all sorts of purchases with home equity.

Consumers have pulled back sharply this year, and most economists attribute that to a decline in home prices of 30 percent in many parts of the region. Local retailers, including car dealers and clothing stores, have cut 4,600 jobs in the last year, or almost 3 percent of their total work force.

"The problem we have in the U.S. economy," Thornberg said, "is too much spending, too much debt. This is an economy that will underperform for a number of years."

The debt issue runs from individual consumers all the way up to the state government, which is struggling to close a $15 billion budget deficit after years in the red.

Employment at public school districts in the region, which had continued to grow into this spring, shrank by more than 10,000 last month. That number reflects the annual gap between retirements and back-to-school hiring, but it also reflects layoffs by school districts caught in the teeth of the state's budget crisis.

Declining enrollment has further reduced state funding to some districts, including the Temecula Valley Unified School District, where school officials point to record numbers of families losing their homes to foreclosure. Carlsbad resident Jennifer Scholz, a second-grade teacher at Nicolas Valley Elementary School, was one of 20 teachers who were laid off and haven't been rehired.

Some will be able to make ends meet by substituting, but Scholz said that's not a good option for her because she gave birth to a son this summer.

"I have to have something concrete so I can put him in a day-care center," she said.

Private-sector employment has plummeted back to levels last seen in September 2005 in the two-county region, where a virtual freeze in home construction has rippled into a series of other industries.

Builders in Riverside County received permits for $1.8 billion in new construction in the first seven months of the year, down 37 percent from last year and down 63 percent from two years ago. Building subcontractors have slashed 15,000 jobs in the two-county region in the last year. More than 2,000 jobs have disappeared from mortgage brokerages and other companies in the finance sector. Real estate agents have reported dramatic reductions in their incomes.

The changes in the labor market come into especially sharp focus among temporary jobs, which have decreased by 10 percent or more in the last year, an executive in the temp industry said. The executive, Phil Blair, said his Manpower franchise in San Diego and Riverside counties is actually doing better than that, but only because he has focused on a handful of expanding industries, including defense, medical devices and anything that involves high technology.

Many companies are expanding, Blair said, but usually at a measured pace: One client, a distributor that serves convenience stores, recently scaled back a request for workers.

"Companies are very cautions about hiring," Blair said.

Contact staff writer Chris Bagley at (951) 676-4315, Ext. 5444, or cbagley@californian.com. Bagley blogs about local economic trends at www.nctimes.com/blogs/minding_your_business.

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