By Jean-Paul Salamanca ( | First Posted: Dec 07, 2012 10:53 PM EST

Unemployment appears to be on the decline in California, although the fiscal cliff and a new tax hike on wealthy earners, Proposition 30, could have an impact, analysts say. (Photo : Wikimedia Commons)


It's a word that evokes dread, especially in times of economic hardship.

In California, which was hit particularly hard during the economic downturn, the jobless levels for the state have been staggering, peaking at one point at a record 12.4 percent in 2010, with an estimated 2.25 million Californians out of work during that year.

However, during the fall, the job rates in the Golden State have seen a glimmer of hope with a modest job gain and a dip in the unemployment numbers. But is the California unemployment crisis really closer to coming to a close?

Job increases for the month

The month of October provided very good returns for job-seeking Californians.

Statistics released late last month by the Labor Department showed that the state added 45,800 new jobs in October, which marked the highest job growth in the nation for the month.

The state's unemployment rate, at 10.8 percent in May, has also slowly been on the decline during a five-month span through October, the U.S. Labor Department's Bureau of Labor Statistics projects.

For October, the unemployment rate fell to 10.1 percent, down one-tenth from September's 10.2 percent and six-tenths below the May unemployment rate figures. Yet California still ranks third highest in the nation in unemployment, behind Nevada and Rhode Island.

And yet, as KPCC reports, California's job growth pace has been impressive, with 27 percent of the 171,000 new jobs added to the country for the month of October coming from the Golden State. In addition to that, the state has added nearly 300,000 jobs, numbers that put them ahead of pace from New York and Texas.

"However, in a truly healthy recovery, the U.S. would be adding 300,000-400,000 jobs each month," KPCC's Matthew DeBord writes. "And a lot of those jobs would be in California. So an overall sluggish rate of hiring is keeping the state's unemployment rate in double digits."

Additionally, it looks like fewer people are filing for unemployment in California. As the Sacramento Business Journal reports, new federal Labor Department numbers reveal that the state saw 7,053 fewer jobless claims in the last week. The drop in claims in the state is credited to fewer layoffs in all sectors, especially within the service industry.

Of the 11 states reporting a decrease in that category, only New Jersey saw a bigger drop in jobless claims, at 23,966 fewer, according to Reuters.

What do the numbers mean?


Well, if you ask economics experts at the respected UCLA Anderson School of Management, it looks like the state is making a slow-emphasis on slow-climb towards recovery.

As ABC News's California affiliate KABC reports, analysts at Anderson School predict that the state's unemployment rate will hover around 10.5 percent by the end of this year, then fall to 9.7 percent next year, with the jobless rate around 8.4 percent in 2014-- better than the national average.

Jerry Nickelsburg, senior economist with the Anderson School, said in a new report that despite only a modest improvement in the job market, California's economy should produce growth rates between 1.4 percent to 2.2 percent.

However, he warns, there could be "significant headwinds" in the world economy in 2013 that could play a role in preventing California's jobless rate from falling below 8.5 percent.

"We've got a recession in Europe that might deepen, slowing growth in China, recession in Japan," said Nickelsburg. "As well, the U.S. consumer is really increasing their purchases of goods and services at a real slow rate."

In addition, the impact of Proposition 30 has yet to make its presence felt in the job market. While the tax hike on earners of $250,000 or higher that was championed by Gov. Jerry Brown--passed by voters on Nov. 6--should prevent education cuts, the policy "creates some risk" and a rise in taxes may have a slight dragging effect on the state's economy, the UCLA Anderson Forecasts warns.

"State government is funded on a highly volatile income stream, namely the income of the upper income earners in California," Nickelsburg said. "Prop. 30 increases the dependence on those income earners for funding state government."

The looming fiscal cliff-which would mean a tax hike for millions of Americans if President Obama and Congress don't agree on a proposal to solve the end of the Bush-era tax cuts-could also have a negative impact on the local economy, economist David Shulman told CBSLA, CBS's Los Angeles affiliate.

"If we go over the cliff for a couple of months, we'll probably have a nasty recession," Shulman said. "CBO says two negative sense it'll be much worse than what they're talking about."

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