School Reopenings Propel Employment But Delta Variant is an Unknown

California’s labor market continued to expand at a rapid pace in July, with total nonfarm employment growing by 114,400 positions, according to an analysis released jointly with the UCR School of Business Center for Economic Forecasting and Development. June’s gains were revised down to 57,200 in the latest numbers, a 17,300 decrease from the preliminary estimate of 74,500.

While California added jobs at a healthy pace in 2021, as of July 2021, there were still 1.13 million fewer people employed than in February 2020. Total nonfarm employment has contracted 6.4 percent since that time.

California compares unfavorably to the nation, where the labor market has shrunk by 3.7 percent in the same period. However, with a larger portion of its workforce to be recovered, California should continue to post more rapid growth relative to the nation in the coming months.

Following impressive job gains throughout the summer, the state has reached an intriguing point in its labor market recovery.

“Labor shortages have been driven in part by school closures, as parents have left the labor force to care for children,” said Taner Osman, research manager at Beacon Economics and the Center for Forecasting. “With schools re-opening, we could see a surge of workers return to the labor market, easing labor shortages.”

On a darker note, Osman said the spread of the Delta variant might cause some workers to remain out of the labor force, which would act as a short-term headwind to labor supply.