Zombie Recovery: CA Jobless Rate Jumps

JULY 22, 2011

By JOHN SEILER

California is suffering what I call a “Zombie Recovery.” The state economy is walking, but dead.

Today the U.S. Bureau of Labor Statistics released new numbers for June 2011 showing that California’s unemployment rose to 11.8 percent from 11.7 percent in May. That reversed slight declines in unemployment in recent months. That means the state is staggering, brainless, through the night of the American economic nightmare.

California’s unemployment rate remained the second worst in the nation, after Nevada’s 12.4 percent.

California’s unemployment increase of 0.1 percentage point mirrored the national increase of the same amount in June, in that case to 9.2 percent. The “green shoots” of economic recovery that Vice President Biden once said he saw growing have been trampled underfoot, especially by the Zombie Army march of California’s economy.

North Dakota Leads the Way

The BLS numbers also showed the contrast heavily taxed and regulated California with North Dakota, whose 3.2 percent unemployment rate is the lowest in the nation. The sweltering summers and frigid winters haven’t stopped businesses from moving to the Peace and Garden State to enjoy its pro-business climate.

According to the ALEC-Laffer “Rich States, Poor States” survey released in May, North Dakota ranked fourth of the 50 states in Economic Performance, with a reasonable tax and regulatory climate. By contrast, California ranked a dismal 46th in Economic Performance due to its punitive tax and regulatory climate.

Of course, some areas of California are booming. On June 19, Apple released a report showing its earnings surpassed analysts’ expectations for the ninth straight quarter. Its popular iPad has propelled sales to record levels.

Google, Intel, Facebook, Twitter and other high-tech companies are growing fast as well. But those companies provide only a small portion of the state’s gargantuan work force.

And even in Silicon Valley, not all is well. Just last month, Apple located a vast, $1 billion server farm in North Carolina after that state improved its tax structure. “North Carolina continues to be a prime location for growing and expanding global technology companies,” said Governor Beverly Perdue. “We welcome Apple to North Carolina and look forward to working with the company as it begins providing a significant economic boost to local communities and the state.”

That boost will not be coming to California.

And just last Monday, Cisco Systems announced it was laying off 11,500 workers. The company makes routers and switches for the Internet. Back in April, Cisco also axed the Flip camera, shedding another 550 jobs.

Meanwhile, California keeps assaulting jobs creators. Back in April, Gov. Jerry Brown signed a law mandating that 33 percent of California electricity must come from “renewable” sources. Critics said it could double the cost of electricity.

AB 32’s expensive Cap and Trade scheme was delayed last month to get beyond next year’s election. But it still looms as another assault on businesses and jobs.

And although Brown signed into law a budget that didn’t include tax increases, he, the Democratic Legislature and their government-union controllers remain obsessed with heaping even higher what already is one of the highest tax burdens in the nation. The uncertainty on future taxes is a big negative for businesses.

Business Exodus Continues

Meanwhile, back in the real world, Relocation Coach Joseph Vranich keeps reporting record departures of California businesses for other states. Here’s just one of them:

Calif. Co. Disinvestment Event #110  

Fisher Investments 

California Community HQ: Woodside

California County: San Mateo

Information: Fisher Investments is building a 120-acre campus in a community near the Columbia River. CEO Ken Fisher has said earlier that that “he’s looking to move his corporate headquarters into a friendlier business climate than Woodside, Calif., where the company is currently based.”

Source: OregonLive.com June 7, 2011 story, “Ken Fisher: Clark County should bang on corporate doors in California, focus on ‘knowledge workers’.”

More Information: The Columbian said that “The $30 million campus could become Fisher’s new corporate headquarters” and that it’s a “$43 billion advisory asset management firm.”

Washington has no state income tax. California’s top income tax rate is 10.3 percent, but it could go much higher if Brown and the Democratic Legislature have their way.