State's 11.5% jobless rate highest since 1941 California economy

43-year-old Shannon Fee sits in her apartment in Alameda, Calif., on June 19, 2009. Fee has been out of work for than a year. 43-year-old Shannon Fee sits in her apartment in Alameda, Calif., on June 19, 2009. Fee has been out of work for than a year. Photo: Michael Macor, The Chronicle Photo: Michael Macor, The Chronicle Image 1 of / 1 Caption Close State's 11.5% jobless rate highest since 1941 1 / 1 Back to Gallery

California's unemployment rate soared to 11.5 percent in May, the highest since the eve of World War II, as employers cut 68,900 jobs, according to a bleak report issued Friday by the state Employment Development Department.

The state's peak unemployment rate was 11.7 percent in January 1941.

Nearly 2.14 million Californians are now hunting for jobs, which are growing scarcer.

"It's a jungle out there," said Shannon Fee, a 43-year-old Alameda woman who has spent a year looking for work in adult education or corporate training with only a few nibbles and no offers.

"The California economy is deeply ill, and we're a long way from getting back to health," said Scott Anderson, senior economist with Wells Fargo.

Anderson thinks the state jobless rate will edge up to 12 percent even if the recession eases this year. The state rate is up from April, when 11.1 percent of Californians were unemployed.

The U.S. unemployment rate is 9.4 percent.

State figures show that this recession has prompted the steepest layoffs in 40 years.

During that period, the worst recessions occurred in the early 1990s and early 1980s. In the '90s downturn, when the aerospace slump clobbered California, 4.1 percent of jobs were lost before payrolls started growing again. During the 1980s recession, employers cut payrolls 3.3 percent.

This time around, since payroll employment peaked in July 2007, about 5.7 percent of regular jobs have been cut, and it is still not clear when the state's labor market will hit bottom and grow again.

Eventual recovery

But Stephen Levy, with the Center for the Continuing Study of the California Economy in Palo Alto, said that as bad as things looks now, the state's job market will eventually recover.

"It's not a bottomless pit," Levy said.

What has hit California hard in this recession, Levy said, has been the twin collapses of the housing market and global trade. The housing bust has led to steep job cuts in construction, finance, insurance and real estate. The trade slowdown has hit sectors like warehousing and transportation.

"But those jobs are not gone permanently. They are coming back," he said, once the recession ends and demand for houses and products returns.

Levy contrasted California's situation with that of Michigan, which has the nation's highest unemployment rate, 14.1 percent, and depends on an auto industry that may never recover.

"The May job numbers were terrible, but there's hope for the future," Levy said.

Zooming in on the Bay Area, the job picture worsened slightly in May but still remains somewhat better than for the state as a whole.

The San Francisco metropolitan area, which includes Marin and San Mateo counties, continues to have the best job market in the region in these bad times, with a May unemployment rate of 8.6 percent.

San Jose outlook bleak

Metropolitan San Jose, made up of Santa Clara and San Benito counties, has the region's longest odds for job hunters, with an unemployment rate of 11.2 percent.

In the Oakland metropolitan area, composed of Alameda and Contra Costa counties, 10.4 percent of job seekers couldn't find jobs in May, including Fee.

As a former Army wife often posted overseas and unable to work, Fee said, her resume reveals gaps between jobs which employers don't like to see. That makes it harder to get the interviews, where she would have a better chance to show her worth.

"I just have to keep at it," she said. "But it's incredibly tough."