Gov. Jerry Brown’s Department of Finance reported:

“Sales and use tax receipts were $123 million below the month’s forecast of $1.710 billion. July represents the final payment for second quarter taxable sales, which was due July 31.”

And state unemployment rose to 8.7 percent in July, up from 8.5 percent in June. It’s still down from the 10.6 percent a year earlier. But it’s also still nearly double the 4.6 percent of 2006, before the Great Recession hit.

On the positive side:

“Last month, the U.S. reported a gain of 162,000 net jobs. That means California captured nearly one in four new positions created in July.”

Treading water

Basically, the state as a whole is treading water. Some ares, such as Silicon Valley and housing, are rising. Most other areas are holding steady.

But we’re just not getting traction for the sustained high growth needed to make up for what was lost during the recession. Such growth occurred nationally during the Reagan Recovery of the 1980s, and especially in California when Gov. George Deukmejian pursued generally conservative policies at the state level and Silicon Valley was going into orbit.

But under the Bush-Obama-Schwarzenegger-Brown policies of heavy government involvement and overspending, combined with faulty Federal Reserve policy — inflationism plus low interest rates — growth has been hobbled.

With the Fed now restricting monetary growth, which is necessary to prevent hyperinflation, there is no rescue on the horizon. Indeed, a new recession is possible.

Recessions hit about every 4-6 years. The last one struck in 2007, six years ago. So we’re due.

When the next recession does hit, it will slam an economy that only partly recovered from the previous recession, the Great Recession.

Which means the next recession could be really bad, especially for California. It’ll be like getting the flu just as you’re recovering from a cold.

Maybe someday we’ll go back to free markets: sound money, tax cuts, spending cuts, fewer regulations. Actually, we’ll have to do that pretty soon. With China, India, etc. breathing down our necks, we’ll have to switch back to capitalism just to keep us from being swamped by the competition.

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.

BY JOHN SEILER

New unemployment figures released March 10 show that California’s Jobs Gap has jumped to 3.4 percent in January 2011. That’s up from 2.6 percent a year earlier, in January 2010.

The “Jobs Gap” is a figure I devised a year ago to explain how much California is lagging the nation in unemployment. It subtracts the national rate of unemployment from the California rate. It thus compares us to the rest of the states.

This chart shows the Jobs Gap in dramatic fashion. The “Jobs Gap” is shown by the green line at the bottom. Notice the “hockey puck” shape of the green line, rising sharply upward beginning in 2006. (The number for 2011 is only for January.)

Last December 2010, California’s unemployment rate dropped a little, to 12.4 from 12.5 percent in November. The January 2011 number, also 12.4 percent, represented no change. Moreover, the average for 2011 was 12.4 percent.

Basically, California’s unemployment rate, now second-worst in the country behind Nevada’s, has remained stagnant even as the U.S. unemployment rate has dropped almost a full percentage point. The national economic recovery, though modest, is almost completely bypassing California.

Budget Impact

This should have implications in budget negotiations in Sacramento, especially concerning whether to put Gov. Jerry Brown’s proposed $12 billion tax yearly increase, for five years, on a special June ballot. The focus of the debate so far has been on whether the state can afford the tax increase.

But with these new Jobs Gap numbers, the focus should shift to whether the state can sustain having sucked from its economy $55 billion (the five-year total) at a time when the unemployment lines barely are shrinking.

By contrast, long-depressed Michigan saw its unemployment rate drop a full point in January 2011. And it dropped a hefty 3.0 percentage points from a year earlier. The Great Lake State now is headed by a dynamic new governor, Rick Snyder, who is working for tax cuts and reform.

Gov. Brown seems stuck in Gov. Arnold Schwarzenegger’s 2009 paradigm of meeting a budget shortfall with tax increases. Indeed,  Brown even calls his tax increases “extensions” of Schwarzenegger’s. Yet Schwarzenegger’s tax increases didn’t solve the state’s budget deficit problem — or we wouldn’t be stuck with the same problem today.

Arnold may be gone from office. But unlike Elvis, Arnold hasn’t left the building.

Jobs Creation Lags

“We have underperformed on jobs creation,” Esmael Adibi told me; he’s director of the A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University. “We’re not getting any oomph in the construction and mortgage industries” because of the housing crash. “We lost jobs fast. Now, coming out of recession, jobs creation is slow.”

In addition to construction and mortgages, the third industry that’s not creating jobs is state and local government, which have seen their budgets cut. “Usually in the past government jobs were recession-proof,” he said. “Now, nobody is hiring and we’re seeing some layoffs.”

He said he expects unemployment to “remain in the double-digits the next couple of years” in California. “A big unknown is gas prices.” As I noted in a blog today, gas prices are expected to gouge an additional $700 yearly from family budgets.

Adibi said that higher gas prices would “take a bite out of people’s disposable incomes.”

Gov. Arnold Schwarzenegger’s 2009 tax increases are scheduled to expire in July. (The income tax increase already expired in January.) Gov. Brown, as noted, wants to extend them.

“Let them expire,” Adibi urged. “Doing so would boost the economy. Clearly that would be good news for the economy. Consumers would spend that money” that would not be taxed from them.

The uncertainty over what tax rates will be the next couple of years also “is really bad,” he added. “There’s also the uncertainty over gas prices. And consumer confidence is down.”

Bill Watkins agreed. He’s executive director of California Lutheran University’s Center for Economic Research and Forecasting (CERF). “Jobs gains in California are going to lag the nation by quite a bit — for many quarters,” he told me. “There’s a structural problem that are going to cause us to have a slower recovery than the U.S. It’ll be less than it could be.”

He also criticized UCLA’s latest forecast for California, out yesterday, which said jobs were not fleeing from California to Texas; and that high taxes here weren’t forcing businesses to the Lone Star State. UCLA said, in the Los Angeles Times’ summary: “California, for instance, takes about 4.7% of what a business produces in taxes — which happens to be the national average. Texas takes more, 4.9%, according to a study last fall by the Council on State Taxation, a business-friendly trade group.”

Watkins said the UCLA forecast made a mistake in not taking into account “fundamental economics, which says that marginal tax rates count. They’re relatively higher in California.” For example, Texas has no state income tax, compared to a 10.55 percent top California income tax rate.

Also, Jerry Nickelsberg, UCLA senior economist, cited a study by the Public Policy Institute of California purporting to show that California’s high taxes don’t affect whether or not jobs stay or leave California for Texas. I critiqued PPIC’s study in a policy report last August right here on CalWatchDog.com.

Watkins said he uses the acronym DURT — Delay, Uncertainty, Regulations and Taxes — to judge an economy’s potential for economic growth. “The high cost of DURT in California is chasing businesses to Texas,” he said.

Texas’ unemployment in January 2011 was 8.3 percent; that’s 0.7 percentage points below the national rate of 9.0 percent. And it was a hefty 4.1 percentage points better than California’s rate.

AB 32 Jobs Crash

I think we’re also seeing what I’ll now name the “AB 32 Jobs Crash.” Look again at the chart, above. The “hockey puck” turn for the worse in the green line began in 2006, when Schwarzenegger signed into law AB 32, the Global Warming Solutions Act of 2006.

Before 2006, the Jobs Gap was only a little above the national number — close enough for statistical error. But now the 3.4 jobs gap is so large it can’t be ignored. The last five years of the Schwarzenegger administration turned out to be a long offensive against California jobs.

Critics of AB 32 warned that it would kill up to 1 million California jobs over the next decade.

Looks like we’re going to reach that dubious goal ahead of schedule.

John Seiler is CalWatchDog.com’s managing editor: writejohnseiler@gmail.com.