California's jobs gain may be fleeting

SAN FRANCISCO (Reuters) - California's beleaguered labor market added 25,700 jobs in October, but the gain may only be a brief respite for the state's legions of job seekers.

California's increase in nonfarm payrolls, announced on Friday, marked the first monthly gain since April 2008, offering some hope employers in the most populous U.S. state may soon stop slashing payrolls.

They have cut over 687,000 nonfarm jobs, or 4.6 percent of those payrolls, over the last year, pushing California's unemployment rate to a post-World War II high of 12.5 percent in October -- the fourth highest level for any U.S. state.

That compares with a year- earlier 8.0 percent and a national average for the month of 10.2 percent.

California's net gain of jobs last month from September provided a glimmer of hope but it was an uncertain foundation for further payroll gains. Governor Arnold Schwarzenegger was understandably guarded in his response to it.

"While I welcome the news that 25,000 jobs were added last month, there are still far too many unemployed Californians who need jobs and can't find them," he said.

Economist Steve Levy of the Center for the Continuing Study of the California Economy likewise looked beyond the new jobs, noting they may be revised away in the state's next monthly labor market report.

"This will not be the first month of sustained job growth in California," Levy said. "This was a false signal that we turned the corner."

NO BUILDING NO REBOUND

California's jobs gain was in line with slower job losses, or a fall in unemployment, in many U.S. states during October.

But more than half of California's new jobs came courtesy of government employers. The data showed private-sector employers across the state, which would be the world's eighth-largest economy were it a nation, are hiring in dribs and drabs, Levy said.

Another reason to expect ongoing hard times for California's jobs market is the poor health of the state's real estate markets. Commercial property is hitting hard times [ID:nN18128514] and the housing market slump may or may not be testing a bottom.

"We're getting to the overall point where we've found a bottom but the question is, 'How long are we going to scrape along?'" said Jonathan Deinhart, a director of published research at Hanley Wood's market intelligence group.

"It's probably going to be a while, and by a while I would say three to six months -- at least," Deinhart said.

Construction workers continue to bear the brunt of California's weak economy. They lost 2,500 jobs in October from September and 136,500 jobs over the past year. Their numbers are down 18.2 percent since October 2008 and many will not work again on a construction site for several years, Deinhart said.

Looser credit for builders and home buyers could help boost construction payrolls but that appears unlikely with lenders holding out only for the best credit risks.

"It will be an albatross around our neck for some time to come," said Jon Haveman, an economist and principal at Beacon Economics in San Rafael, California.

And it's not just property-related payrolls in California being cut or held in check by the credit crunch, Haveman said. His economic consulting firm has been denied a loan on the basis that it is less than three years old.

"It's going to be small businesses such as mine and mid-sized business that will struggle to get the credit that we need and because of that we'll have diminished hiring over the next couple of years," Haveman said.

(Editing by Andrew Hay)