Worries about the 'fiscal cliff' probably deterred businesses from hiring, economists say. Unemployment holds steady at 9.8%.
After adding jobs at a steady clip through most of last year, California's employment engine lost steam in December as employers reduced payrolls by 17,500 net positions.
The unemployment rate remained unchanged at 9.8% last month, according to figures released Friday by the state's Employment Development Department.
The loss of payroll jobs in December ends a seven-month streak in the Golden State.
For much of 2012, year-over-year job growth hovered around 2%, which helped drive the unemployment rate down 1.4 percentage points since December 2011.
The growth rate has now slowed to 1.6%, narrowly outpacing the nationwide growth rate of 1.4%. U.S. unemployment ended the year at 7.8%, the same as the revised November figure, the Bureau of Labor Statistics reported earlier this month.
Economists said that the state jobs report was disappointing, and that the threatened "fiscal cliff" mixture of federal tax increases and spending cuts probably caused hiring uncertainty late in the year.
Congress later reached a deal, but not before hampering business confidence, economists said.
"I believe businesses were very worried about the 'fiscal cliff' issue," said Esmael Adibi, director of Chapman University's A. Gary Anderson Center for Economic Research. "I think this report reflects that."
Across the state, eight sectors recorded job losses in December, with the steepest decline in trade, transportation and utilities. Led primarily by losses in retail trade, that sector shed 11,200 jobs.
Retailers had ramped up hiring heading into last year's holiday shopping season, but spending was only modestly higher than in 2011.
The professional and business services sector, which includes white-collar occupations such as accountants and lawyers, shed 8,800 jobs.
Construction, which has been aided by a recovering housing market, added 4,100 jobs last month. The sector, which saw employment grow 4.4% compared with a year earlier, has seen a turnaround as demand for multi-unit housing has flourished.
Education and health services added 9,200 jobs in December. Healthcare, which continued expanding even during the recession, added more than half of those jobs in that sector.
Some economists met Friday's jobs report with skepticism.
"It's important not to overreact because of the possibility of revision," said Lynn Reaser, chief economist at the Fermanian Business & Economic Institute at Point Loma Nazarene University. Still, she said, "the loss of momentum at the end of the year is a concern."
The report did contain at least one bright spot: The labor force grew by almost 73,000 as people reentered the workforce.
"A lot of this is people going back to work," said John Husing, an Inland Empire economist. "It's not just people dropping out, which is very good news."
Among those who have returned to looking for work is former graphic designer Brian Madrigal.
The 28-year-old Glendale resident said he has been out of work for about six months and has relied on unemployment benefits to scrape by.
"There's lots of part-time work," he said. "I'm looking for a more stable job."