In what could be a sign that the local economy is growing stronger while the rest of the state slows down, unemployment in L.A. County dropped to a seasonally adjusted 5.4 percent in June.

More significantly, the gap between the local unemployment rate and that of the state as a whole narrowed to just two-tenths of a percent, the smallest it has been in years.

Statewide, unemployment stood at 5.2 percent in June (seasonally adjusted), up from 5.1 percent in May. It was also unchanged from June of last year. By contrast, L.A. County’s 5.4 percent unemployment rate is down from 5.7 percent in May and from 5.8 percent in June of last year.

Although caution is warranted when interpreting monthly data from the Department of Labor Statistics, some local economists see the latest figures as an indication that the L.A. economy is going through a period of strong growth while the rest of the state may be taking a breather.

“This could be the start of a trend we’d like to see continue,” said Joe Magaddino, chairman of the Department of Economics at Cal State Long Beach. “The Los Angeles economy has been under-performing and was really hurting last year because of weakness in overseas economies. These numbers suggests that things are picking up again, and we’re expecting to see 2.3 percent job growth this year.”

That projection would seem to be pretty much on the mark given that in June, the number of non-farm jobs in L.A. increased by 87,900, or 2.2 percent over the June 1999 level. By contrast, from June 1998 to June 1999, the local economy added just 45,600 non-farm jobs, for a 1.2 percent increase.

The industries that contributed the lion’s share of growth during the past 12 months were business services, which added 15,800 jobs in a variety of professions from software developers to low-skilled temps. Movie production added 10,000 jobs, while retail trade was up by 11,200 jobs and education jumped by 15,400 jobs.

Manufacturing, on the other hand, shed 12,700 jobs in L.A. over the year, primarily through losses in the aerospace and apparel industries.

Trailing the nation

The surge in jobs puts L.A. in the same ballpark as the rest of California in terms of unemployment for the first time in about nine years. Although both L.A. and the state are showing very low unemployment, they’re nowhere near the incredibly low 4 percent unemployment rate for the nation as a whole, and they’re unlikely to get there anytime soon.

“Job growth in Los Angeles and California is tied in with economic growth in the rest of the U.S.,” said Rajeev Dhawan, director of econometric forecasting at the UCLA Anderson Forecast. “For our unemployment rate to come down to the 4 percent range, nationwide unemployment would have to drop to 3 percent, which the Fed would never let happen because it would spark of major inflation.”

Through the economic expansion of the 1990s, L.A. has been trailing the rest of the state in terms of job creation. In fact the last time the unemployment rate in L.A. was lower than that of California was in December ’91, as the recession was getting into high gear and 9 percent of L.A. workers were without a job, vs. 9.5 percent statewide.

Not all the pundits believe the latest labor numbers point to a shift in the balance between Los Angeles and California in terms of jobs creation and overall economic strength.

“It would be very surprising if these numbers were to stick,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. “Monthly labor figures usually get revised the following month, and that is likely to happen with these as well.”

Other economists agree that it’s unlikely the gap between L.A. and the rest of the state is closing so quickly, and that a revision of June labor numbers could reflect a greater gap.

Outpacing Bay Area

Nevertheless, there’s no denying that L.A. is showing some renewed vigor.

“Right now, Southern California is growing at least as fast or faster than the Bay Area,” said Steven Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto. “And we’re seeing strong job growth there across the board. International trade is growing very fast, with the volume of cargo through the ports up by 20 percent for the year, movie production is up, in spite of all the rumbling we keep hearing from the industry about loss of production. The hotel industry is booming, and professional services and construction industries continue to do really well.”

Levy expects that, after a number of years in which Northern California has led the state in economic growth, the coming years will see a considerably more balanced picture, with Southern California in general and Los Angeles in particular picking up more of the slack.

Whereas the Bay Area is quickly running out of space and people to accommodate the double-digit growth of the recent past, L.A. still has a good degree of affordable housing and commercial space, as well as a less-tight labor market at least until now.

“The economic base in the Bay Area is still strong, but this year things are a bit slower than in Southern California because of the restraints in the (Bay Area) housing market,” said Levy. “It’s a little easier in Southern California, where there’s still room for growth left.”

Indeed, notwithstanding the strong job growth in L.A., the region is still officially in recovery mode. That is, the local economy has still not regained all the jobs that were lost in the recession of the early 1990s, although economists suspect that by the end of the year that milestone could be passed.