Unemployment in California at 12%, Highest in Nearly 70 Years

LOS ANGELES — California’s unemployment rate in August hit its highest point in nearly 70 years, starkly underscoring how the nation’s incipient economic recovery continues to elude millions of Americans looking for work.

While job losses continue to fall, the state’s new unemployment rate — 12.2 percent, according to the Bureau of Labor Statistics — is far above the national average of 9.7 percent and places California, the nation’s most-populous state, fourth behind Michigan, Nevada and Rhode Island. Statistics kept by the state show California’s unemployment rate was 14.7 percent in 1940, said Kevin Callori, a spokesman for the California Employment Development Department.While California has convulsed under the same blows as the rest of the country over the last two years, its exposure to both the foreclosure crisis and the slowdown in construction — an industry that has fueled growth in much of the state over the last decade — has been outsized.

Total building levels in California have fallen to $23 billion this year from $63 billion in 2005; home building this year is less than a quarter of what it was in 2005, according to the Center for Continuing Study of the California Economy. Roughly 500,000 of the state’s job losses have been in construction, finance, real estate and industries related to construction.

“We were at the epicenter of the housing bubble, and we are at the epicenter of the fallout,” said Stephen Levy, senior economist and director of the center. “The reason we are doing worse in California than other states is construction.”

While California has enjoyed some signs of a comeback in recent months, unemployment, which is often the last economic indicator to turn around in a protracted recession, is expected to remain high for the near future. For example, a recent study by the University of California, Los Angeles, predicted that while the state would enjoy 2 percent quarterly growth in 2010, the unemployment rate would remain above 10 percent.

Such numbers have caused deep pain to a state overly reliant on personal income taxes to balance its budget. The near collapse of the stock market, which greatly reduced personal wealth in the state, and job losses related to the housing bust combined to sharply reduce that source of revenue.

In July, Gov. Arnold Schwarzenegger signed a budget that closed a roughly $24 billion two-year gap with extensive cuts to social services, parks and education. This has left the state with large numbers of people without jobs seeking government services, which further strained its resources and hindered potential consumer spending among laid off and furloughed government workers.

The governor seized on California’s grim unemployment milestone Friday to make a case for his current pet projects: revising the state’s tax system, fixing its broken water system, which has contributed to unemployment in the state’s farm regions, and tapping the federal government for all he can get.

“The latest unemployment numbers reinforce the importance of combining federal, state and local efforts to put Californians back to work and to help all those struggling in this difficult economy,” Mr. Schwarzenegger said. “Immediately addressing our challenges, which include reforming the state’s antiquated tax structure and updating our water delivery system will move the state forward and build a stronger, more diverse economy. While I am pleased to see fewer jobs lost, my administration will not rest until job growth resumes and employment returns to normal.”

Earlier this week, Ben S. Bernanke, the Federal Reserve chairman, proclaimed that the country was emerging from its protracted recession, and doubtlessly, California is showing its own signs of recovery. In Southern California, the center of the housing bust, home sales rose 11 percent in August from a year earlier, and prices have begun to tick up as well. In addition, the state’s exports are once again growing as international economics, particularly in Asia, have begun to recover and create demand for goods, and layoffs have slowed statewide.

“Any economist would tell you we’re in a recovery,” Mr. Levy said. “Job losses are lessening, the G.D.P. is rising, the housing market is stabilizing, and have you looked at the stock market lately? But the unemployment rate is the thing families care about. They don’t care about G.D.P. or China coming back; they care about jobs.”