Newsom claims private-sector jobs boom, but numbers likely to be revised down

(The Center Square) - As California Governor Newsom celebrated 43,700 reported new jobs in May, a California government agency warned final numbers will likely be lower than what Newsom claims. On the bright side, preliminary data in the agency’s report says private sector hiring in May returned to levels not seen since July 2022.

The California Legislative Analyst’s Office, a non-partisan, state-funded government agency, warned that state monthly jobs surveys of businesses have “routinely overestimated job growth in the state” since 2022, when private employment peaked, and that final numbers that use payroll records are more accurate but much lower.

“Once preliminary survey figures are finalized using comprehensive payroll records, the figures have been revised downward by an average of 30,000 jobs each month,” wrote LAO principal fiscal and policy analyst Chas Alamo. “

By using an average of the difference between preliminary business survey and revised, payroll-adjusted jobs numbers, Alamo calculated a more realistic jobs number for May, claiming this “hybrid measure … suggests the state added 27,000 jobs in May, less than the 43,000 jobs reported in the preliminary report.”

Report data also noted preliminary private sector hiring in May reached 30,000 jobs, a figure not matched since July of 2022. Using Alamo’s preliminary-to-adjusted ratio for May suggests private sector jobs may have only grown by nearly 19,000, but with April preliminary data showing a loss of 8,000 private sector jobs, this still represents a significant turnaround.

The report ended with a warning that net private-sector losses have been masked by public-sector and publicly-supported jobs growth.

“In addition to overestimates, the headline figures from the state's recent jobs reports have masked broad weakness in the state's private-sector labor market that began in 2022,” wrote Alamo. “The monthly jobs tallies have been buoyed by continued growth in public-sector jobs and publicly supported industry jobs. Since its post-pandemic peak in September 2022, California's private sector has lost a net 154,000 jobs (1.2%) while the public sector has gained 361,000 jobs (7%).”

With Newsom’s 2024-2025 budget closing a $47 billion budget shortfall through a combination of spending cuts, shifts, and deferrals, and the LAO warning of revenue shortfalls through the 2027-2028 fiscal year in its multi-year budget outlook, continued private-sector jobs growth will be necessary to maintain employment levels amid likely cuts in state spending.