California’s unemployment rate increased in July while job creation slowed to a crawl, fueling fears that the state’s fragile recovery is faltering.

The jobless rate last month ticked up to 12% from 11.8% in June, according to figures released Friday by the state Employment Development Department. California now has the second-highest rate of unemployment in the nation, trailing only Nevada at 12.9%, and its jobless rate is well above the U.S. average of 9.1%.

The July hiring picture was bleak. California employers added just 4,500 new jobs last month, a steep drop from the revised 30,400 jobs added in June.

“The California economy is treading water. It’s growing but not fast enough to create net new jobs,” said Scott Anderson, a senior economist at Wells Fargo Securities. “The recent knock in consumer and business confidence could be enough to tip California back into recession.”


Analysts said California was performing worse than the nation largely because of its real estate hangover. When the property bubble burst, it wiped out 1.3 million jobs, many of them in construction, real estate and mortgage-related financial services. Those sectors have yet to recover.

And while pockets of the Golden State are doing well, including San Diego’s bio-sciences companies and technology firms in the Bay Area, their growth hasn’t been strong enough to pull California out of its jobs hole.

The state’s fiscal woes are also proving to be a drag on employment. The public sector is a major employer in California, which in the past has acted as bulwark during tough times. But deep budget cuts are forcing many local governments to shed workers this time around.

In addition, California’s fortunes are largely tied to the health of the U.S. economy, whose growth has slowed as the year has progressed. In short, there’s no quick fix that California leaders can use to turn the unemployment situation around, said economist Esmael Adibi of Chapman University in Orange.


“There is nothing much they can do,” Adibi said. “The state generally can make the business climate healthy and not impose too much regulation and zoning and taxes and in the short term, control spending.”

That’s little comfort to those who are out of work. More than 2.1 million Californians are unemployed; one-third of them have been jobless for a year or more.

Among them is North Hollywood resident Anzhela Mousisyan. The former salesclerk went back to college to retrain as a pharmacy technician, thinking that healthcare would be a growth industry. But a long search has been fruitless, and she’s struggling to repay $10,000 in student loans.

“No one wants to hire a new grad if they don’t have experience,” said Mousisyan, 42. “I’ve had my license for two years now and I can’t find a job.”


Although net jobs grew modestly in eight of California’s 11 industry sectors, employment declined in three areas: trade, transportation and utilities; financial activities; and government, the Employment Development Department said.

Government, which has been battered by state and local budget cuts, posted the worst performance, losing 5,800 jobs in July.

Public sector layoffs are masking some of the gains made in the private sector, said Nancy Sidhu, chief economist for the Los Angeles Economic Development Corp.

As a result, “the best that can be said about July is that recovery paused to take a break,” Sidhu said. “And I’m not sure what August will bring. Certainly, there have been a lot of fireworks in the financial markets, and that suggests that there could be another pause.”


Economic growth in Los Angeles County and the region has been so slow that “you have to step back and look at some distance” to see it, Sidhu said.

Los Angeles County’s unemployment rate rose sharply to 12.4% in July from 12% in June. Orange County’s rate edged up to 9.3% from 9.2% in June. Ventura County’s July rate was 10.7%, up from 10.3% the previous month. San Bernardino County posted a 14.3% unemployment rate in July, up from 14% in June. Riverside County’s July rate was 15.1%, up from 14.4% the month before.

Chronic joblessness, combined with a shaky stock market and a European debt crisis, portend extremely slow economic growth at best for the nation and California, analysts said.

Randall Turner of Woodland Hills hopes that things turn around soon. The Navy veteran is having a tough time finding work as a sous-chef.


“It’s been very rough. I’ve been applying and interviewing all the time,” he said. “But the job offers are zero.”

marc.lifsher@latimes.com