Midway through 2009, the Sacramento economy is still shrinking at a brisk rate.

In June, the year-over-year rate of job loss increased from -5.1% to -5.2% — a new record. 

This caused the metro area’s unemployment rate to increase from 11.1% to 11.6%, on a par with the state unemployment rate and well above the unemployment rate for the country as a whole (9.7%).

As is the case in most major urban areas in the U.S., the collapse of Sacramento’s housing market has had a profound impact on the metro area’s labour market.

Over the past year, the level of residential building, as reflected by the value of building permits, has dropped by 50%, resulting in a 23% year-over-year decline in construction employment.

The sharp drop in housing demand and the concomitant collapse of consumer and investor confidence has resulted in major job cuts in all but two of Sacramento’s major industrial sectors: education and government.  

By far the most severe job losses have occurred in construction (-23.1%), followed by information services (-9.4%), professional and business services (-8.5%), finance (-8.0%), manufacturing (-7.9%), leisure and hospitality (-7.6%) and trade (-7.3%).

Looking forward, though, there are tentative signs the Sacramento economy is starting to stabilize.

Although median house prices are down 20% year over year, according to MDA DataQuick, they held steady in June due to a slight increase in sales of both new and existing dwellings.

Furthermore, the most recent Manpower Employment Outlook Survey of hiring plans indicated that “hiring activity is expected to be slightly stronger” in the third quarter compared to the second quarter.

Despite these signs of modest improvement, the prospects for the Sacramento economy are still extremely fragile.

California recently announced that state employees would be required to take an unpaid three-day furlough once a month in order to help reduce state expenditures.

According to the Centre for Strategic Economic Research, this 10% to 14% pay cut will directly affect the disposable incomes of approximately 110,000 state employees in the metro area.
Meanwhile, cuts to municipal budgets will indirectly impact the 116,000 local government employees.