In a surprisingly strong economic report, California employers stepped up their hiring in May and the statewide unemployment rate dropped for the first time since the summer of 2022, the government reported Friday.

Employers in the state added 43,700 jobs last month across a broad spectrum of industries, breaking from the recent pattern of lagging behind the nation in job creation. In April, the California economy produced only 4,100 jobs.

The state Employment Development Department noted that the May increase in payrolls accounted for 16.1% of the country’s overall gains of 272,000 jobs, exceeding California’s 11% share of employment nationally.

However, manufacturing in California continued to shed jobs, as did the high-paying information sector, which includes the struggling motion picture industry.

Last month California’s unemployment rate edged down to 5.2%, from 5.3% in April, even as the U.S. jobless figure went up a notch in May to 4%. Until last month, the state’s unemployment rate had been gradually rising since reaching a low of 3.8% in August 2022.

In April, California had the highest unemployment rate in the nation, reflecting weakness in some of the state’s leading sectors, including technology, information and professional services.

The improvement in May, though just one month, was a welcome relief to officials after the state’s recent subpar performance and amid signs that the national economy is slowing down. Consumer spending is softening and job openings in California and other states have been shrinking in recent months.

California’s job gains last month continued a pattern of solid growth in health services and at government offices. Leisure and hospitality businesses also added to their payrolls, despite the pressure of higher minimum wages, especially at fast-food restaurants.

Significantly, several sectors that had been weak — professional services, trade and transportation, and financial services — also saw job growth last month.

“Before state government celebrates too widely, it is worth noting a few of the job dynamics not in the state’s press release,” said Michael Bernick, former director of the state EDD.

He noted that California has an outsized number of unemployment claims — almost double the state’s share of the U.S. labor force population. And a large portion of the job gains last month were in industries that offer lower wages and fewer hours.

What’s more, job gains are still coming disproportionately from publicly funded sectors such as healthcare and social assistance as well as government agencies, Bernick said. He and other analysts worry that California’s large budget deficit will spill over to the broader economy in the coming months.

The former Ace Hotel in downtown Los Angeles, which helped lead an economic revival on a historic stretch of Broadway a decade ago, has reopened as a minimal-service operation akin to Airbnb, following a strategy that has become increasingly common for struggling hotels in recent years

Now called Stile Downtown Los Angeles by Kasa, the 1920s-vintage hotel tower has resumed limited operations after shutting down nearly six months ago. Downtown hotels were particularly hard-hit by the pandemic, and some have changed owners or operators.

Ace Hotel Group had operated the 182-room hotel near Broadway and Olympic Boulevard since it opened in 2014, even as its ownership changed twice over the years. The chic brand made the Ace a destination for travelers as well as local residents who patronized its buzzy rooftop bar and restaurants.

Korea-based AJU Continuum, which bought the hotel in 2019, announced last week that it had brought in Kasa Living Inc. to operate the property.

Kasa, which is based in San Francisco and has a national presence, “offers the consistency of a major hotel chain with the convenience and character of a modern short-term rental,” AJU Continuum said in a statement.

Ace Hotel said upon its departure that the Broadway hotel would be operated in the future as “a limited-service, rooms-only operation, managed via a tech platform.”

The limited-service model under which guests typically receive codes to get into their rooms via their phones is “basically an Airbnb on steroids,” said Donald Wise, a hotel investment banker at Turnbull Capital Group. “You’re not going to someone’s house or a condo, but to a box that has no more or less service than an Airbnb would have.”

The independent United Theater on Broadway, which is connected to the hotel, will continue to operate as an open venue hosting concerts, performances and special events, AJU Continuum said. The hotel will have a rooftop wine bar, but no restaurants.

The site has had multiple identities since it was built in 1927. Constructed with backing from film luminaries Mary Pickford, Douglas Fairbanks, Charlie Chaplin and D.W. Griffith, it originally was meant in part to provide a theater for the United Artists movie production company they founded.

The Spanish Gothic theater was designed by C. Howard Crane and the tower by Walker & Eisen, the team behind other local landmarks including the Fine Arts Building downtown and the Beverly Wilshire hotel in Beverly Hills. It held offices for rent and a theater where United Artists pictures premiered, starting with Pickford’s film “My Best Girl.”

Other prominent occupants of the property through the years include California Petroleum Corp., Texaco and flamboyant preacher Gene Scott, whose broadcasts were heard nationally. He died in 2005.

The opening of the Ace in 2014 was a pivotal point in the residential renaissance of downtown that helped spur growth nearby, said Nick Griffin, executive vice president of DTLA Alliance, formerly the Downtown Center Business Improvement District.

“It was evocative of that particular moment in downtown, arriving as a kind of a hipster paradise,” he said. “That area of Ninth and Broadway was a particularly hip area with fashion and hotels at the intersection of the Historic Core, the fashion district and the downtown center.”

Two other boutique hotels created in historic buildings followed the Ace to the neighborhood: the Hoxton Downtown LA and Downtown L.A. Proper. Both are also on Broadway.

Short-term rentals in former traditional hotels and apartment buildings have been popping up downtown as business owners work to find financial equilibrium, Griffin said.

“The new model of short-term rentals is sort of indicative of this moment in downtown as we continue to evolve and innovate coming out of the pandemic.”

Griffin’s improvement district reported that average downtown hotel occupancy, which plunged during the pandemic, has reached nearly 69%, up a percentage point from a year ago. That’s close to what is usually considered a healthy rate but down from late 2019 when occupancy was closer to 80% and average room rates were higher.

“The downtown Los Angeles market is still lagging, hasn’t recovered fully to the numbers that were pre-COVID,” said consultant Alan Reay of Atlas Hospitality Group. “We are definitely starting to see more distress among owners.”

Challenges for hotel owners include a reduction in business travelers to downtown offices as more people work from home resulting in lower revenue. They also face high interest rates on their loans and rising labor costs.

Limited service hotels such as Stile may produce more profit for their owners while also lowering rates for guests who don’t mind having fewer services, Reay said.

The Supreme Court on Thursday refused to put new limits on Congress’ power to tax wealth that is not paid out in annual dividends.

In a setback for anti-tax conservatives, the justices upheld a provision of a 2017 tax law that imposed a one-time levy on the profits of foreign corporations whose shares were owned by Americans.

In a 7-2 decision, the justices said Congress has the power to tax corporate shareholders based on the company’s “undistributed income.”

“This court has long upheld taxes of that kind, and we do the same today,” said Justice Brett M. Kavanaugh for the court.

The case came to the court as a test of whether the conservative majority would put constitutional limits on “wealth taxes.”
Instead, the justices upheld an income tax that is not based on annual dividends.

While the decision upheld a Trump-era tax, progressives and tax experts cheered the ruling.

“Today’s decision will allow Congress to continue to exercise its power to tax income to fund the government and to make sure that all taxpayers — including multinational corporations and wealthy taxpayers — pay their fair share,” said Chye-Ching Huang, executive director of the Tax Law Center at NYU Law.

Alexandra Thornton of the Center for American Progress said the ruling “means that wealthy people attempting to avoid taxes by offshoring their money have to pay their fair share, just like every other American. The court’s decision avoids an outcome that would have thrown the American tax system into disarray and put at risk other forms of taxation that raise billions of dollars in revenue.”

Some noted that the ruling was limited to an unusual tax provision.

“The court makes clear it is not opening the door to a wealth tax, which would still face constitutional problems as a tax on property,” said Joe Bishop-Henchman of the National Taxpayers Union.

Thursday’s decision did not resolve a persistent dispute over whether the Constitution’s approval of income taxes includes taxing shares of corporate stock, or instead is limited to “realized” gains, such as wages, stock sales and stock dividends.

“So the precise and narrow question that the court addresses today is whether Congress may attribute an entity’s realized and undistributed income to the entity’s shareholders or partners, and then tax the shareholders or partners on their portions of that income,” Kavanaugh wrote for the majority. “This court’s longstanding precedents, reflected in and reinforced by Congress’s longstanding practice, establish that the answer is yes.”

Justices Clarence Thomas and Neil M. Gorsuch dissented.

Thomas wrote that the 16th Amendment says income is “only income realized by the taxpayer. The text and history of the amendment make clear that it requires a distinction between ‘income’ and the ‘source’ from which that income is ‘derived.’ And, the only way to draw such a distinction is with a realization requirement.”

Some conservatives fear that a future Congress led by progressive Democrats would impose taxes on accumulated wealth.

They urged the court to hear the case of Moore vs. United States and to rule that Congress may not impose a tax on “property or wealth.”

At issue in the case was the meaning of the 16th Amendment, ratified in 1913. It says Congress has the power to “lay and collect taxes on incomes, from whatever source derived.”

A few years later, the Supreme Court said corporate shares held by taxpayers could not be taxed as income unless they were “realized or received” as income. That decision was generally understood to mean that the government may impose taxes on wages or stock dividends, but not necessarily on property or corporate wealth that grows in value. These are referred to as “unrealized gains.”

But many constitutional scholars and tax experts had questioned that interpretation of the 16th Amendment. And in recent decades, Congress has imposed taxes on individuals who are earning income in partnerships and have ownership shares in some corporations, even if dividends are not paid out each year.

The case of Charles and Kathleen Moore began when they received a $14,729 tax bill for their ownership shares of a company based in India.

The Moores, who are retired and live in Washington state, said they received no income or dividends from their investment in the company, which supplies equipment to small farmers. They sued, alleging the tax was unconstitutional under the 16th Amendment.

But a federal judge and the 9th Circuit Court of Appeals disagreed with them and upheld part of the 2017 tax bill passed by the Republican-controlled Congress and signed by President Trump. It imposed a one-time tax on Americans who owned shares in foreign corporations that gained in value. The tax measure included large tax breaks for the wealthy, but to offset those losses in tax revenue, lawmakers sought to recoup some profits that Americans held abroad.

With the backing of the U.S. Chamber of Commerce and other business groups, the Moores petitioned the court with the help of Washington attorney David B. Rivkin and urged the justices to strike down the tax on overseas profits.

Some had called for Justice Samuel A. Alito Jr. to recuse himself from the matter.

Rivkin who helped write the appeal petition, interviewed Alito for two articles that appeared in the Wall Street Journal last year.

“There was no valid reason for my recusal in this case,” Alito wrote in response in September. “When Mr. Rivkin participated in the interviews and co-authored the articles, he did so as a journalist, not an advocate. The case in which he is involved was never mentioned; nor did we discuss any issue in that case either directly or indirectly.”

Alito concurred in the outcome Thursday.