As unemployment dips, has Modesto area seen the worst of its coronavirus job losses?
After three straight months of “stunning” job losses due to the ongoing coronavirus pandemic, the unemployment rate in Stanislaus County stopped its sharp upward climb but remained near a 20-year high for May.
The jobless rate dipped to 16.1% last month, down from a high this year of 17.5% in April, according to data released Friday by the state Employment Development Department. The drop could signal the worst of the jobs crisis caused by the COVID-19 outbreak is over for the valley — at least for now.
The pandemic has affected nearly every facet of life, putting millions out of work and overwhelming the country’s health care system. Unemployment rates have skyrocketed across the country as the global health crisis continues.
In Stanislaus County, unemployment was at 6.6% in February, then climbed to 8.4% in March and 17.5% in April. May, traditionally the start of seasonal farm hiring, saw a halt to the dramatic increases in jobless claims driven by coronavirus and its subsequent shutdowns.
Jeffrey Michael, director of the Center for Business and Policy Research at the University of the Pacific, said the increase in unemployment in the past few months has been “stunning” and represents “a major economic shock.”
Still, the dip in May could be a good sign for the valley moving forward. Typically hiring driven by the Valley’s vast agriculture industry brings a drop of about 1 percentage point in the jobless rate from April to May, Michael said. This May saw a stronger-than average 1.4 percentage point drop.
“It shows some stabilization in the labor market. Maybe we’ve reached a bottom and are starting to make some improvements,” Michael said. “I think (April’s 17.5%) is your high unless we get a big second wave that comes through in the fall or winter. If so, it’s possible we could be back at these levels again.”
From record lows to near record unemployment highs
Yet unemployment remains significantly higher than a year ago, when the jobless rate was at 5.6% in the county for May. Last year, the county also hit a nearly 30-year low for its unemployment rate in September when it dropped to 4.6%.
Michael said April’s coronavirus-driven 17.5% unemployment rate isn’t record-setting in Modesto and Stanislaus County. During the aftermath of the 2008 financial crisis, the county’s unemployment rate reached 18.9% in February 2010. During the previous recession of the early 1990s, the county rate shot to 19.6% in February 1993, the highest recorded in the EDD database.
But the Great Recession disproportionately affected the Modesto area and North San Joaquin Valley, unlike the current financial crisis, which is affecting communities similarly across the country. In other areas of the country, the current unemployment rates are higher than they’ve been in decades.
According to the Bureau of Labor Statistics, the national unemployment rate for May was 13.3%, down by 1.4 percentage points from April, when it measured 14.7%. In March, nationwide unemployment was at 4.4%, up just a percentage point from a year-long stretch of unemployment numbers below 4%. California has seen a similar spike in unemployment, from seasonally adjusted rates of 5.5% in March to 16.4% in April and 16.3% in May.
EDD Labor Market Consultant Amanda Ha said May’s stronger numbers in Stanislaus County appear driven by seasonal hiring, which has historically seen lower unemployment rates across the region from May to September. Farming industries added 2,000 jobs from April to May, leading job growth for the county last month. Construction also saw a robust increase, adding some 1,700 jobs.
But all industries, from farming to manufacturing to retail and government, saw year-to-year job losses in the hundreds — and in most cases thousands.
Gökçe Soydemir, the Foster Farms endowed chair of business economics at California State University, Stanislaus, said the sectors most affected by the pandemic include retail and hospitality, with much of the rebound in retail sales happening online.
Recovery expected to pick up next month, then slow
Still there’s reason to be hopeful as the county heads toward recovery from the swift and unprecedented unemployment rate climb of the past few months. Michael said Modesto’s low unemployment rate leading into the pandemic will be helpful as the county aims to return to a healthy economy once the crisis is over.
He added that he expects the economy to start recovering quickly, starting in the summer, but for more sustainable recuperation to happen gradually. With more industries reopening from coronavirus shutdowns, including restaurants and retailers, next month should see another drop in the unemployment rate.
Soydemir also forecasts a recovery in the second half of 2020, with a peak toward the end of the year and a chance for a full recovery in 2021. The speed of recovery will depend largely on how a potential second wave of the virus will affect the economy, he said, as well as how proactive residents are in continuing to combat the pandemic, through efforts like social distancing and wearing masks.
But don’t expect full recovery to be rapid, Michael said.
“We’ve never seen anything happen this quickly, even in the valley that was so hard hit in the Great Recession. To get to the same levels it happened over a couple years, not over a couple of months,” he said. “So while I expect more improvement next month, then I think the pace of improvement may slow down as we go into fall. There’s a lot of uncertainty so we’ll see how it unfolds.”
This story was originally published June 19, 2020 at 3:29 PM.
