U.S. News
Why California Has the Highest Unemployment Rate in the U.S.
By Jake Beardslee · August 16, 2025
California has overtaken all other states in unemployment, according to new state labor data released Friday. The state’s unemployment rate reached 5.5 percent in July, up from 5.4 percent in June and the highest level since December. That figure places California well above the national average of 4.2 percent and highlights the uneven nature of the country’s recovery.
The weak labor market comes as the U.S. overall added 73,000 jobs in July, a slower pace than earlier in the year and following downward revisions for May and June. California gained a net 15,000 jobs last month, but the increase was offset by more people re-entering the workforce. Household surveys showed 18,200 more Californians seeking work compared to June, pushing the unemployment rate higher.
Job growth was uneven across industries. Health care and private education led the way with 23,100 new jobs, while government employment rose by 7,200. Smaller gains were recorded in trade, transportation, utilities, and manufacturing, though manufacturing has shed 32,500 positions since last year. By contrast, professional and business services lost 7,100 jobs, and the information sector—home to much of California’s tech industry—declined by 1,000. Michael Bernick, former head of the state Employment Development Department, described conditions for job seekers in the tech sector as particularly dire. “It’s brutal out there,” he told the San Francisco Chronicle, noting that automation and pandemic-era overhiring have left new graduates struggling to find opportunities.
Federal spending reductions have also taken a toll. The Trump administration’s Department of Government Efficiency cut California’s federal workforce by 400 jobs in July, while local governments in San Francisco, Oakland, and San Jose face hiring freezes tied to budget deficits. The state is also feeling the effects of Trump’s tariffs, though the full impact remains uncertain. California is the nation’s largest importer and second-largest exporter, conducting more than $675 billion in two-way trade.
Governor Gavin Newsom has tried to shield the state from these pressures while also addressing joblessness. Earlier this year, he directed his administration to expand trade ties with countries imposing retaliatory tariffs, urging them to exclude California-made goods. In April, he announced the Master Plan for Career Education, aimed at connecting Californians to high-paying jobs without requiring a degree. The plan includes Career Passports, expanded credit for prior learning, and a major apprenticeship initiative. California now has more than 91,000 active apprentices, with a goal of 500,000 by 2029, and has distributed nearly $11 million in grants for programs serving veterans, the long-term unemployed, and at-risk youth.