There is an ongoing debate about the state of the California economy. One set of voices argues that the state has a terrible business climate and that the state lags in job growth because firms are “fleeing” California. Another set of voices says “wait a minute”—the data show that the state’s poor job growth is the result of the housing bust and, more recently, the loss of government jobs. Both voices acknowledge that the state must deal with an ongoing budget deficit and develop an economic strategy for prosperity but they offer different roadmaps for success. Recent revisions to job estimates added jobs in California while showing slower job growth in the nation than previously thought. What do these numbers tell us?
Author: Steve Levy
The headline numbers in today’s California employment report (12.5% unemployment and a 4,900 job gain) give a misleading reading of the improvements in the California economy during the pat two months. Job growth in November, originally reported 1,600, was revised upward to 30,500 based on gains in manufacturing, retail trade and services. And the job growth for December includes losses of 15,400 government jobs and additional losses of another 3,200 construction jobs.
The California economy, while hard hit by the construction collapse and national recession, remains a world economic powerhouse. The latest numbers portray a state growing slightly faster than the nation over the past decade, driven by the high productivity tech sector. Now the state and national challenge is to mount another burst of growth driven by innovation and creativity. These are difficult challenges in today’s mood of anger and gridlock but we have responded before and must do so again.
California’s unemployment rate is now nearly 3% higher than the national rate. In August 2010 California’s unemployment rate was 12.4% compared to the national 9.6% unemployment rate. The state’s unemployment was this much above the national rate once before in the early 1990s as a result of the large loss of aerospace jobs. The state’s job losses, then as now, were far larger than the national job losses and the state’s recovery took longer. Moreover, the aerospace job losses were permanent, not cyclical losses. Still by 2000 and for several years thereafter California’s unemployment rate was near the national average. What are the causes of the current high unemployment rates in California and what does that mean for the near and medium term economic future?