U.S., Calif. Economies Crashing?
John Seiler:
Californians should thank the ghost of Hiram Johnson that taxes weren’t raised in the new budget, and that we got a little tax cut on July 1. Gov. Jerry Brown, the Democratic Legislature and the government unions that own them were defeated, at least for now.
That’s because the economy is halting again. Today’s U.S. jobless numbers were dismal. U.S. unemployment rose from 9.1 percent to 9.2 percent in June. Just 18,000 jobs were added nationally that month.
California’s jobless numbers won’t be released until later this month. But they are unlikely to be any better than the national numbers. After all, California’s 1/9th of the population makes up about 1/9th of the national economy. And our anti-business climate doesn’t look inviting to companies looking for what little jobs creation can be squeezed out.
Economists at IHS-Global Insight called the report “a shocker. It was far worse than expected, and weak on all key dimensions — job creation, unemployment, the length of the workweek, and hourly earnings.
“The recent pattern of jobs suggests that the economy hit a brick wall in May. It added an average of 215,000 jobs per month in the three months ended April, but only 22,000 per month in May and June.
“Supply-chain disruptions and bad weather are unconvincing as explanations for the extent of the weakness. A delayed response to the cumulative impact of surging commodity costs during the first half of the year is a more plausible explanation, but this report has dashed hopes that the economy was about to accelerate again now that those costs have eased back. The employment report is showing a much bleaker picture than other indicators…We must hope that it is overstating the extent of the slowdown in the economy — at face value it shows stagnation.
The bad jobs numbers also call into question the assumption in the budget just passed that $4 billion in extra taxes will be collected the rest of the year. The unemployed take far more in government handouts than they pay in taxes.
Tax increases would have fired another torpedo into the Good Ship California. At least we dodged them this time around.
July 8, 2011
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