By Maria Dinzeo

(CN) — The Golden State is outpacing the rest of the nation in job creation, according to the latest jobs report from the state Employment Development Department that suggests the state is recovering from the ravages of the pandemic-induced business shutdowns of two years ago.

The 138,100 jobs California added last month marks highest the state’s largest increase since July 2021, the report says, noting that California accounted for 20.4% of the 678,000 jobs the U.S. gained in February 2021.

After cutting more jobs at the outset of the pandemic than any other state, California employers have recovered 87.2% of the 2,758,900 non-farm jobs lost during March and April of 2020.

“That’s only slightly behind the 90% that the nation recovered,” said Steve Levy, director of the Center for Continuing Study of the California Economy. “So if these trends continue, we will again be back in our position of outpacing the nation in job growth.”

Jeffrey Clemens, economics professor at University of California, San Diego, said the decline in California’s unemployment rate and its February job growth were both impressive developments.

“The overall picture for California’s labor market is significantly more optimistic than it was several months ago. The rapid decline in Omicron cases is a clear leading factor behind the February numbers,” he said, adding that California is about 350,000 jobs short of pre-pandemic employment levels.

The leisure and hospitality, transportation and construction sectors posted the most job growth since January, with the education and health service sectors following on their heels. Clemens said leisure and hospitality is still lagging, however, accounting for 213,000 or roughly 60% of those missing jobs.

Sung Won Sohn, professor of finance and economics at Loyola Marymount University, attributed this rise to the economy opening up post-pandemic.

“As people move about, leisure and hospitality including restaurants, bars and lodging accounted for 22% of the job gain,” he said. “Los Angeles County with its large people-contact businesses has shown the fastest increase in jobs accounting for 44% of California’s employment increase in February. As economic activity gained momentum, trade and transportation including trucking represented another 21% of the employment increases. As the economy shows more zip, additional employment will occur in these sectors.”

The statewide unemployment rate also dropped to 5.4% in February, a slight improvement compared with 5.7% in January.

“These latest numbers show that California is continuing to drive our nation’s job growth,” said Gov. Gavin Newsom, who is up for reelection in November. “We’re doing it by promoting more pathways to opportunity and embracing the diversity, creativity, innovation, and determination that breeds success — building a California for all.”

Unemployment is currently the lowest in San Francisco Bay Area counties including Santa Clara (2.9%), San Mateo (2.7%), San Francisco (3%), Marin (2.8%) and Alameda (3.8%). The rate is higher in more rural areas and in the agricultural San Joaquin Valley, like Tulare County (9.2%), Kern County (8.3%), Kings County (8.5)%, Sutter County (8%), and Plumas County (9.9%).

Levy ascribed the disparity to the counties’ low contribution to the state’s overall job growth.

“They haven’t participated in the job recovery or any long term job growth. This idea that jobs are going to leave Bay Area or Southern California just hasn’t panned out.” He also noted that with the exception of Tahoe, rural counties are not huge vacation destinations. They’re not tech hubs or near the ports- two industries that retained positive growth even during the pandemic.

“They’re struggling economically,” he said.

Sohn cautioned that despite a rosier-than-expected February jobs report, inflation and labor shortages still pose a hurdle to the state’s economic rebound.

“California’s economy has big mountains to climb. Even before the Russian invasion of Ukraine, inflation was at a 40-year high,” he said.

He added that although California’s ration of average hourly earnings is below the nationwide average, “With the price of oil and many commodity prices jumping, inflation ahead could be at the fastest pace in half a century. If the geopolitical events keep fueling inflationary pressures for an extended period, California’s economic growth could suffer.”

Sohn also said labor shortages continue to be the main problem for California employers. “Workers are in no hurry to return to work. There are lots of jobs available in the midst of labor shortages. Wages for new hires are higher than those for the existing workers. Even though children are back to school, some parents are not ready to go back to work.”

In a blog post Friday, the nonpartisan California Public Policy Institute also praised the jobs recovery as “stronger than we thought,” but observed, “Overall, employment is still below pre-Covid levels and unemployment is 1.3 points above pre-COVID levels.”

Job vacancies remain an issue, the PPIC noted, as do supply chain bottlenecks and the high cost of goods.

“These headwinds will continue to buffet California’s economy and some of its workers and businesses,” the researchers said. “But the state should be well positioned to address economic challenges in the context of a rapid recovery. In the coming months, we will start to see whether shifts such as remote work and muted employment in leisure and hospitality become permanent or return to prior patterns. These concrete indications of the post-COVID economy should guide California’s efforts to spur economic growth and prepare for future workforce needs.”

Levy was optimistic that industries like hospitality and entertainment, which were hit hardest by Covid, will bounce back as restrictions wane.

“the sectors that were hurt during the pandemic are coming back now that activity is coming back. We’re still in a recovery period, but the relaxation of those COVID-19 restrictions presages a pretty good continuing recovery if the new strain doesn’t kick up the cases again,” he said. “If we remain relatively free of COVID-19, then people will start to back to most of their normal activities and we’ll do better.”