California’s job growth has continued to slow this month, according to an analysis released jointly by Beacon Economics and the UCR School of Business Center for Economic Forecasting and Development. Although the latest numbers from the California EDD indicate that the state added 17,600 jobs in May, recouping the revised decline of 17,600 positions in April, year-over-year gains (+1.5% this month), remain near multi-year lows and slightly below growth at the national level (+1.6%).

The driving force behind the slowdown in the state is twofold. First, the state’s employers are finding it increasingly difficult to find candidates to fill skilled positions, and second, because of high housing costs, employers are finding it increasingly difficult to fill lower-paying jobs.

“For the second month in a row California’s yearly growth rate dipped below the nation’s,” said Robert Kleinhenz, Executive Director of Research at Beacon Economics and the Center for Forecasting. “While job growth nationally has also slowed, our concern is that California’s job growth will be constrained because we are at full employment, we have insufficient numbers of qualified workers for certain positions, and rising housing costs are increasingly challenging for lower and middle income households.”

The state’s unemployment rate fell to 4.7% in May, a 0.1 percentage point decline from April. However, this drop was mainly due to a decline in the state’s labor force (-23,000) during the month, while household employment only grew by 3,600 during the month.

Key Findings:

Government led all sectors in the latest numbers, adding 12,300 payroll positions in May. Local Governments continue to drive the bulk of these gains, with education and other local positions both contributing.

The Information sector contributed significantly to statewide gains, adding 9,600 payroll positions. Motion Pictures and Sound Recording, although still down over 8% for the year, saw a resurgence during the month and accounted for over half the gains across the broader sector. Software Publishers, while accounting for smaller number of jobs than Motion Picture and Sound Recording, also had a strong month, and have expanded payrolls by 7.1% for the year.

Other sectors posting sizeable gains this month include Wholesale Trade (+4,000), Finance and Insurance (+2,300), Other Services (+1,800), and Transportation, Warehouse, and Utilities (+1,400).

The Leisure and Hospitality sector saw the steepest declines this month, shedding 9,700 payroll positions. Despite this one-month dip, payrolls in Leisure and Hospitality are still up 2.3% for the year. Other sectors posting declines this month include Retail Trade (-2,300) and Administrative Support (-1,700).

Regionally, growth was a mixed bag for the state in May with some areas seeing solid growth, while others posted declines. In Southern California, the Los Angeles (MD) (+13,600), San Diego (+1,700), and the Inland Empire (+1,400) posted gains, while Orange County (-3,700) posted declines. In the San Francisco Bay Area, San Jose (+1,500) posted gains, while the East Bay (-3,100), Santa Rosa (-800), and San Francisco (MD) (-200) posted declines. In the Central Valley, Sacramento (+3,300), Bakersfield (+900), and Modesto (+600) posted gains, while Visalia (-800) posted declines. In percentage terms Hanford (+0.8%) posted the largest month-to-month payroll gains and Visalia (-0.6%) saw the steepest declines.