Please ensure Javascript is enabled for purposes of website accessibility
Newsom Brags About CA's Economy, but Unemployment Tells a Different Story
dan_walters
By Dan Walters, CalMatters Commentary
Published 4 months ago on
August 4, 2024

California's unemployment rate remains the highest in the nation, contradicting Gov. Newsom's boasts about economic strength. (AP/Marcio Jose Sanchez)

Share

Getting your Trinity Audio player ready...

Gov. Gavin Newsom tirelessly touts the size and strength of California’s economy, often contrasting it with those of other states.

Dan Walters Profile Picture

Dan Walters

CalMatters

Opinion

When, for example, the monthly employment report was issued in June, Newsom bragged on X, formerly Twitter, that “California continues to lead the nation’s economy & create good jobs throughout the state. Just this year, the state created over 107,000 jobs — more than doubling … the same time period last year.”

Actually the report, based on May data, was not that positive.

While the state’s 5.2% unemployment rate was slightly lower than April’s rate, it was still the highest of any state. In June it was still unchanged and remains the nation’s highest, albeit tied with Nevada. It also was markedly higher than the jobless rates in Florida (3.3%) and Texas (4%), two red states that Newsom often disparages.

The recent reports on California’s job picture are nothing new. California has consistently had unemployment rates at or near the nation’s highest ever since the COVID-19 pandemic faded away.

About 3 million Californians lost their jobs during the pandemic, thanks largely to Newsom’s orders to shut down businesses. The state’s recovery has been sluggish vis-a-vis those of other states. There are still more than a million California workers without jobs.

Budget Deficit and Unemployment Insurance Fund Woes

California’s mediocre economic recovery has had many effects, one being an immense budget deficit. The Newsom administration’s 2022 projection of a fast recovery and a cornucopia of state revenues turned out to be wildly inaccurate, leading to a wide gap between income and outgo.

Another impact is the truly sorry condition of the unemployment insurance fund, which provides support payments to jobless workers.

When the pandemic hit and unemployment soared, the unemployment insurance fund quickly exhausted its slender reserves and the state borrowed some $20 billion from the federal government to maintain payments.

Not only has California not repaid the loans, but it is one of only two states that have failed to do so (New York still owes about $6 billion). And the unemployment insurance fund’s deficit is growing because the state is still not taking in enough money from payroll taxes to cover its current payments.

Thanks to California’s stubbornly high unemployment rate, the Employment Development Department expects the unemployment insurance fund to receive $4.8 billion in payroll taxes this year but to pay out $6.8 billion in benefits, meaning the fund’s deficit, including federal loans, will reach $21.7 billion by the end of this year and $22 billion in 2025.

Historical Context and Political Stalemate

The underlying problem predates Newsom’s governorship. Nearly a quarter-century ago, the Legislature and then-Gov. Gray Davis enacted a 50% increase in unemployment insurance benefits, counting on what was then a healthy fund reserve to finance them.

However, when recession struck shortly thereafter, the fund was drained to pay benefits and had only barely regained solvency when the Great Recession hammered the state a half-decade later. The state borrowed about $10 billion to keep benefits flowing, and the feds increased payroll taxes on California employers to repay the debt.

The pandemic hit just after that loan was repaid, and employers are again being taxed to repay the even larger debt incurred. However, it’s not enough to prevent the fund’s deficit from increasing.

The effects of relatively high unemployment are compounded by a decades-long political stalemate over how to make the unemployment insurance fund healthy again, pitting employers against unions over whether payroll taxes should be increased or benefits should be curtailed.

Newsom’s bragging about California’s economy in the face of such negative data not only undermines his credibility but ill-serves the state. The ever-growing unemployment insurance fund deficit is a crisis that should demand political attention, not be ignored.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times.

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

Make Your Voice Heard

GV Wire encourages vigorous debate from people and organizations on local, state, and national issues. Submit your op-ed to bmcewen@gvwire.com for consideration.

RELATED TOPICS:

DON'T MISS

$165 Billion Revenue Error Continues to Haunt California’s Budget

DON'T MISS

California’s Water Crisis Deepens as San Joaquin Valley Sinks

DON'T MISS

What to Know About Pam Bondi, Trump’s New Pick for Attorney General

DON'T MISS

North Korean Leader Says Past Diplomacy Only Confirmed US Hostility

DON'T MISS

Democrats Strike Deal to Get More Biden Judges Confirmed Before Congress Adjourns

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

UP NEXT

California’s Water Crisis Deepens as San Joaquin Valley Sinks

UP NEXT

What to Know About Pam Bondi, Trump’s New Pick for Attorney General

UP NEXT

North Korean Leader Says Past Diplomacy Only Confirmed US Hostility

UP NEXT

Democrats Strike Deal to Get More Biden Judges Confirmed Before Congress Adjourns

UP NEXT

Newsom Gaslights on Potential Gas Price Hikes in Fresno Visit

UP NEXT

Automakers to Trump: Please Require Us to Sell Electric Vehicles

UP NEXT

President Biden Welcomes 2024 NBA Champion Boston Celtics to White House

UP NEXT

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

UP NEXT

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

UP NEXT

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

North Korean Leader Says Past Diplomacy Only Confirmed US Hostility

13 hours ago

Democrats Strike Deal to Get More Biden Judges Confirmed Before Congress Adjourns

13 hours ago

Newsom Gaslights on Potential Gas Price Hikes in Fresno Visit

13 hours ago

Automakers to Trump: Please Require Us to Sell Electric Vehicles

14 hours ago

President Biden Welcomes 2024 NBA Champion Boston Celtics to White House

14 hours ago

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

14 hours ago

Trump Chooses Pam Bondi for Attorney General Pick After Gaetz Withdraws

15 hours ago

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

15 hours ago

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

15 hours ago

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

15 hours ago

$165 Billion Revenue Error Continues to Haunt California’s Budget

History will — or at least should — see a $165 billion error in revenue estimates as one of California’s most boneheaded political act...

1 hour ago

1 hour ago

$165 Billion Revenue Error Continues to Haunt California’s Budget

Photo of Friant-Kern Canal
2 hours ago

California’s Water Crisis Deepens as San Joaquin Valley Sinks

12 hours ago

What to Know About Pam Bondi, Trump’s New Pick for Attorney General

13 hours ago

North Korean Leader Says Past Diplomacy Only Confirmed US Hostility

13 hours ago

Democrats Strike Deal to Get More Biden Judges Confirmed Before Congress Adjourns

13 hours 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)
14 hours ago

Automakers to Trump: Please Require Us to Sell Electric Vehicles

14 hours ago

President Biden Welcomes 2024 NBA Champion Boston Celtics to White House

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

Search

Send this to a friend