California finally regains jobs lost in COVID-19 recession

 
09/02/2022

[ Article originally appeared in www.calmatters.org ]

By Dan Walters, CalMatters

For months, Gov. Gavin Newsom habitually crowed about California’s recovery from the recession that hit the state when he shut down much of its economy to battle COVID-19.

By cherrypicking monthly employment statistics, Newsom claimed that the state was leading the nation in job gains, even when California’s unemployment rate was near the highest of any state, topping out at 16.1% with more than 2.6 million Californians having lost their jobs.

Finally, however, Newsom can legitimately hail an almost full employment recovery. In July, the state’s unemployment rate dropped to 3.9%, exactly the record-low number that California achieved in February 2020, just before he issued the first of his shutdown orders.

Total employment in July was still a bit lower than it was 28 months earlier, 18.8 million vs. 18.6 million, but the labor force was also a little smaller, 19.5 million vs. 19.3 million, and virtually every private economic sector saw full employment recovery. Government was the only major sector still lagging, about 100,000 workers fewer than it had been.

“California is getting very close to fully recovering all the jobs it lost due to the pandemic,” Taner Osman, research manager at Beacon Economics and the UC Riverside Center for Economic Forecasting. “In fact, if we repeat this month’s job gains next month, we will reach that milestone.”

“Californians are getting back to work with record low unemployment,” Newsom said when July’s data were released this month. “We have historic reserves and we’re putting money back in peoples’ pockets as we continue to lead the nation’s economic recovery.”
 

If there’s any negative aspect to the latest data, it is that while 3.9% ties a record for low unemployment in California, it’s still the nation’s 38th highest, more than twice as high as No. 1 Minnesota’s 1.9%, and substantially higher than jobless rates in states Californians tend to see as economic backwaters, such as Mississippi and Alabama.

California’s unemployment rate is also 1.2 percentage points higher than Florida’s, a state that Newsom delights in disparaging, and only a tiny bit lower than the rate in Texas, another Newsom foil.

So, one might wonder, where does California’s economy go from here?

There are some indications of economic softening. For example, state income tax revenues are running somewhat below the 2022-23 budget’s expectations.

Economists are divided over the direction of the national economy — whether it’s already in recession or on the cusp — in light of sharp increases in interest rates by the Federal Reserve System to counter runaway inflation.

Upticks in interest have already cooled what had been a red hot housing market in California, reducing the pool of would-be buyers by increasing monthly mortgage payments.

We know from past experience that when the nation’s economy catches a cold, it quickly turns to pneumonia in California and that a serious drop in the stock market due to rising interest rates would have a disproportionately negative impact on California’s budget.

About three-quarters of the state’s general fund revenues come from personal income taxes and the top tiers of taxpayers generate the vast majority of those taxes, largely from their gains in the stock market and other investments.

In the shorter run, however, economic expansion may be hindered by an increasingly acute shortage of workers. The proliferation of help-wanted signs in California attests to the troubling fact that relatively few working-age adults are either employed or are available for work. The state’s “labor force participation rate” of 61% is two percentage points lower than it was a decade ago and one of the nation’s lowest.

SOURCE: https://calmatters.org/commentary/2022/08/california-finally-regains-jobs-lost-in-covid-19-recession/



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