Please ensure Javascript is enabled for purposes of website accessibility
Walters: California Economy Faces Tough Slog
dan_walters
By Dan Walters, CalMatters Commentary
Published 4 years ago on
August 2, 2020

Share

It now seems like ancient history, but only a few months ago, California’s economy was roaring.

“By any standard measure, by nearly every recognizable metric, the state of California is not just thriving but, in many instances, leading the country, inventing the future, and inspiring the nation,” Gov. Gavin Newsom boasted in February’s state of the state address.

Dan Walters

Opinion

“We remain the fifth-largest economy in the world — enjoying 118 consecutive months of net job growth, some 3.4 million jobs created since the Great Recession and nearly 4 million small businesses call California their home. More than half of all U.S. venture capital still flows to California companies. We’ve averaged 3.8% GDP growth over five years — compared, respectfully, to 2.5% national growth.”

Just eight days later, Newsom delivered his first webcast report on the coronavirus infection, quickly followed by his March 4 state of emergency declaration and the first of many orders that would shut down much of the state’s economy.

The economy quickly imploded as hundreds of thousands, and then millions, of Californians lost their jobs. Two months later, with California’s infection rates relatively low and unemployment soaring to levels not seen since the Great Depression, Newsom eased up. He allowed a partial “reopening” of some economic sectors and a few hundred thousand Californians went back to work.

The respite was, however, short-lived. As infections, hospitalizations and deaths surged in July, Newsom reimposed economic shutdowns, many jobs once again vanished and Californians were left wondering about the state’s economic future, and their own.

Lodging and Food Service Workers Have Been Hit the Hardest

The latest report from the state Employment Development Department reveals that unemployment hit 16.4% in May — four points higher than the peak of the Great Recession a decade ago — and then dropped a bit to 14.9% in June during the brief reopening. Since then, it’s climbed again, but how high we don’t yet know.

Lodging and food service workers have been hit the hardest, but there are no exempt sectors in those grim numbers.

As high as it is, the official jobless rate is a bit misleading, because it is a percentage of the state’s labor force, and thus doesn’t count those who have dropped out. California’s labor force has shrunken by about 400,000 persons in the past year and including them as jobless pushes the real unemployment rate up by at least two percentage points, knocking on the door of 20%.

Overall, employment in June was 2.5 million below what it had been a year earlier, which corresponds to having 2.5 million more Californians collecting unemployment insurance benefits than in June 2019. The extra $600 a week in benefits that Congress provided to jobless workers has buoyed California’s consumer economy by more than $5 billion a month, staving off housing evictions and foreclosures, but they expired last week and it’s uncertain whether they will be reinstated, eliminated or reduced.

It’s Going to Be a Very Tough Slog

Legislative leaders are proposing a state-only relief program that would maintain extra jobless benefits, but it hinges on borrowed money and its fate is equally uncertain.

After the rollercoaster ride of the past five months, and with COVID-19 still rampaging, it’s evident that the V-shaped recovery some economists predicted — a rapid decline followed by a rapid expansion — is not going to happen.

It’s more likely to be a U-shaped recovery when, and if, it happens. That is, we will probably see a fairly long period of low output and high unemployment and, whenever the pandemic is tamed, a gradual expansion — but no one can predict when the worst will be over.

It’s going to be a very tough slog.

CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.

DON'T MISS

Newsom Gaslights on Potential Gas Price Hikes in Fresno Visit

DON'T MISS

Automakers to Trump: Please Require Us to Sell Electric Vehicles

DON'T MISS

President Biden Welcomes 2024 NBA Champion Boston Celtics to White House

DON'T MISS

Ohtani Makes History With 3rd MVP, Judge Claims 2nd AL Honor

DON'T MISS

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

DON'T MISS

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

DON'T MISS

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

DON'T MISS

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

DON'T MISS

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

DON'T MISS

Jussie Smollett’s Conviction in 2019 Attack on Himself Is Overturned

UP NEXT

How Trump Can Earn a Place in History That He Did Not Expect

UP NEXT

Demography Drives Destiny and Right Now California Is Losing

UP NEXT

Defining Deviancy Down. And Down. And Down.

UP NEXT

How Three Trump Policy Decrees Could Affect California Farmers

UP NEXT

Donald Trump Is Already Starting to Fail

UP NEXT

I Can’t Wait for Matt Gaetz’s Confirmation Hearings

UP NEXT

Let the Games Begin: 2026 Campaign for CA Governor Looms

UP NEXT

Why Trump’s Deportations Will Drive Up Your Grocery Bill

UP NEXT

Dems Still Dominate California, but Their Voters Have Drifted to the Right

UP NEXT

If You Thought Trump Wasn’t Serious About Deportations, Look at His First Appointments

Ohtani Makes History With 3rd MVP, Judge Claims 2nd AL Honor

1 hour ago

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

2 hours ago

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

2 hours ago

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

2 hours ago

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

3 hours ago

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

3 hours ago

Jussie Smollett’s Conviction in 2019 Attack on Himself Is Overturned

3 hours ago

Fresno Council Lowers Speed Limits on Friant and Audubon

3 hours ago

How About an Honest Conversation About the Range of Light Monument Proposal?

4 hours ago

UConn Coach Geno Auriemma Breaks NCAA Wins Record With 1,217th Victory

5 hours ago

Newsom Gaslights on Potential Gas Price Hikes in Fresno Visit

Gov. Gavin Newsom in a stop Thursday in Fresno defended the recent actions of his air board, saying he takes “pride” in new clim...

29 minutes ago

29 minutes ago

Newsom Gaslights on Potential Gas Price Hikes in Fresno Visit

President Joe Biden with Mary Barra, the chief executive of General Motors, at the Detroit Auto Show, Sept. 14, 2022. President-elect Donald Trump has promised to erase the Biden administration’s tailpipe rules designed to get carmakers to produce electric vehicles, but most U.S. automakers want to keep them. (Doug Mills/The New York Times)
59 minutes ago

Automakers to Trump: Please Require Us to Sell Electric Vehicles

1 hour ago

President Biden Welcomes 2024 NBA Champion Boston Celtics to White House

1 hour ago

Ohtani Makes History With 3rd MVP, Judge Claims 2nd AL Honor

Former Florida Attorney General Pam Bondi, speaks before Republican presidential nominee former President Donald Trump arrives to speak at a campaign rally at First Horizon Coliseum, Saturday, Nov. 2, 2024, in Greensboro, NC. (AP/Alex Brandon)
2 hours ago

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

2 hours ago

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

2 hours ago

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

3 hours ago

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

Help continue the work that gets you the news that matters most.

Search

Send this to a friend