Forecast: California Economy Stagnating

JUNE 23, 2011


California’s economy is growing at a slower pace even than the stagnating U.S. Economy. California jobs creation is sharply lower than U.S. jobs creation. The state, basically, has missed the modest recovery of the past two years — even as the country may be sliding into another recession.

Those are the top conclusions from the economic forecast released today by the Center for Economic Research and Forecasting at California Lutheran University. The conclusions confirm something I’ve been pointing out in articles here on while the governor and the Legislature have been concentrating on the state’s budget problems, the real economic issue in California is the inability of state businesses to create new jobs. The California government has become a fat, bloated, jobs-killing machine.

Here’s their graph of California unemployment, which they foresee sticking above 11 percent for the next 18 months. That’s total stagnation.


California’s ‘Lost Decade’

The chart clearly shows that California’s unemployment rate (the yellow bars) will continue to stagnate well above the national unemployment rate (the red line). The anti-business, jobs-killing policies begun under Gov. Arnold Schwarzenegger with his beloved AB 32 in 2006, and continuing with his record $13 billion tax increase of 2009, have slammed the state into a “lost decade.” The question now is whether the California economy now will be lost for another decade.

As CERF Executive Director Bill Watkins warned:

For some reason, many California analysts have a hard time accepting the fact that California’s future isn’t what it used to be. Instead, they get pretty creative in making excuses. A few months ago California had a reported 200,000 new jobs month. It was obvious that this was an anomaly and was obviously unsustainable. No matter, the apologists were elated. Press releases were issued, and newspaper articles joyfully touted California’s new-found economic vigor. Alas, their joy was short-lived. Job numbers fell, and last month [May], California lost almost 30,000 jobs.

Outside the glimmer of Silicon Valley and the glamour of Hollywood, the California economy is sick. It isn’t growing. It isn’t performing well.

Watkins continued:

Let’s get real.

California has the second-highest unemployment rate in the United States. It is only exceed by Nevada, and it is worse than perpetually depressed Michigan. In the past year, California has only gained a net 87,300 non-farm jobs. Since the recession started, California is down 1,136,900 non-farm jobs, and that is after the past year’s gains.

Construction jobs are surely down. California has lost 53 percent of its pre-recession construction jobs, but at 304,000 jobs lost, Construction only accounts for about 27 percent of California’s lost jobs. Manufacturing is down over 200,000 jobs. Other big job-losing sectors are Retail Trade, down 166,300 jobs; Financial, down 123,700 jobs; and Professional Services, down 162,600 jobs. Only one sector, Educational and Health Services, is up and only 127,700 jobs.

Rich Counties, Poor Couties

California also is becoming two states economically, with most of the coastal counties doing relatively well, but the inland counties performing abysmally.

San Diego, Orange, and Santa Clara counties are doing better, with unemployment below 10 percent; but those counties account for just 21 percent of the state’s population.

By contrast, “California has 19 counties with unemployment rates in excess of 15 percent.” Economists define unemployment above 15 percent as being in a technical “depression.” Those 19 counties are about one third of the state’s 58 counties. So, about a third of the state is suffering a depression.

Watkins said that California has many advantages, including a great climate, prime location on the Pacific Rim, being part of the vast U.S. economy, a trained workforce, ports and great cities.

The problem is the state’s horrible economic policies. The state’s water, energy and highway systems once were among America’s best. “California once built things,” Watkins observed. “Today, every project is controversial, and everyone seemingly has a veto on every project. Delay is epic and uncertainty accompanies every step of every California project. Regulation and taxes choke the vigor out of private business.”

An education system once among the nation’s finest, he said, “Today it is in decline, unable to muster the ability to effectively deal with budget challenges, reduced to impotent tantrums, like a child demanding attention.”

Indeed, “tantrum” is the right word to use for a state government that, for a decade now, has whined about everything, blaming everyone but its own bloated, repressive self for the state’s problems.

The question is when California citizens will rise up and restore the luster to the former Golden State.






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