One Indicator Shows California’s Recovery Is Incomplete

Despite assurances that California’s economy is a treasure to behold – “We are world-beating in terms of our economic growth,” says Gov. Gavin Newsom – the post-pandemic recovery has a gaping hole in it. State unemployment is the highest in the country.

Federal data for October show that the jobless rate improved from September’s 7.5% to 7.3%. That puts the state in a last-place tie with Nevada, and far off Nebraska’s best-in-the-nation 1.3%.

Texas and Florida, rivals in many ways, posted far better numbers in October, 5.4% and 4.6% respectively.

The Bureau of Labor Statistics also reports nine of the 15 metropolitan areas posting the highest jobless rates in the country are in California. This includes the Los Angeles-Long Beach-Anaheim metropolitan area statistical area, which has an unemployment rate of 7.1% – 373rd in a list of 389 metro regions.

Newsom can brag about California “dominating in every category,” and being home to the “fastest growing companies, the most influential companies in the world,” as he did at October’s California Economic Summit.

But an economy that has a jobless rate as high as this state’s isn’t fully healthy, a fact that hasn’t gone unnoticed. The Public Policy Institute of California’s November survey found that 52% expect bad times ahead, while only 47% expect good times. Four months earlier, the outlook was just the opposite: Only 44% expected bad times ahead, while 54% thought the future looked good.

Legendary California journalist Dan Walters recently pointed out that eight of the 10 states with the lowest unemployment rates in October were red states, and nine of the 10 states with the highest jobless rates were blue. It’s a sharp reminder that public policy plays a substantial role in joblessness.

“It could just be coincidence, of course, but maybe those red states with low unemployment rates have regulatory and tax policies that encourage job-creating investment and maybe California and the other blue states with high jobless rates are perceived as being hostile to business,” he says.

Walters was being charitable. Taxes and regulation always impact job numbers, and both are uniquely heavy burdens for California businesses. Regulation stifles innovation, which promotes job growth, and we know taxes negatively affect employment because lawmakers say as much when they hand out tax breaks to companies expecting them to put people to work.

Lockdowns also figure in the state’s high jobless rate. Many businesses that were forced to close never reopened, and some that did still aren’t operating at full capacity. By October, the state had regained only a little more than two-thirds of the 2.7 million jobs that were lost due to the lockdowns.

California policymakers have come to think they can do whatever they want, and the hard work of previous generations that built this state will save them from the negative economic consequences that spin off their plans. It doesn’t work that way, though. There’s too much garbage in, garbage out in Sacramento.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

This article first appeared in the Pacific Research Institute

Public Nuisance Lawsuits Could Compound Cloudy California Economic Forecast


Government regulationToday, the sun is shining on the California economy, with unemployment at a record low. Our state is the fifth largest economy in the world with more billionaires than anywhere else in the country. State government is also doing well. Governor Brown inherited a $26 billion deficit upon entering office. Today, the state has a surplus of nearly $16 billion. This is good for businesses and good for the California families they support.

But there’s no guarantee those sunny days will last. In fact, many economists predict the dark clouds of recession in California’s future. Recessions are always particularly troubling for California because of our high reliance on wealthy taxpayers for revenue. Austerity could be on the way, as well as tough times for California businesses in a slower economy.

Another storm cloud looms on California’s horizon as well. California cities are increasingly considering filing so-called “public nuisance” lawsuits against manufacturers, alleging that manufacturers contribute to climate change and are at least partially responsible for sea level rise and wildfires. High-profile cases brought by San Francisco and Oakland have already been dismissed, as has a lawsuit brought by New York City. However, mayors and public officials in other California municipalities and in states like New York, Colorado, Rhode Island, Maryland and Washington continue to threaten manufacturers with lawsuits labeling them as public nuisances, seeking to both make political statements and score financial paydays.

California’s major cases aren’t out of the woods yet either. San Francisco and Oakland are appealing United States District Judge William Alsup’s dismissal of the case, with the cities’ opening brief due to the Ninth Circuit by December 10. Judge Alsup ruled, as did his counterpart in New York City’s case, that the problem of climate change is best addressed by the legislative and executive branches.

Fortunately, a number of California mayors are standing firm against these misguided lawsuits. Those include Irvine Mayor Don Wagner, who has publicly opposed climate litigation and noted that the courts are poor choices for handling climate policy decisions. Wagner has been joined by Huntington Beach Mayor Mike Posey, who warned in California Political Review that public nuisance lawsuits could eventually target municipal governments themselves and argued that working alongside manufacturers, not suing them, is the best way to achieve economic goals and job growth. La Habra Mayor Tim Shaw echoed this idea, stating that municipalities should refrain from filing frivolous climate lawsuits since mayors need to make it easier, not harder, for businesses to create more jobs.

These mayors and others, of course, have real reason for concern. California is hemorrhaging both people and businesses already. A November U.S. Census Bureau report says the Golden State has had 142,932 more residents exit to live in other states than people arriving from other states. This outflow is 11% higher than in 2015 and was second nationally only behind the New York and New Jersey area. Businesses are exiting too. Carl’s Jr., a longtime California icon, has relocated to Nashville. Toyota said goodbye to Torrance and will completely relocate its U.S. headquarters to Dallas in the coming weeks. Joining Toyota in Dallas is Jacobs Engineering Group, which is moving its $6.3 billion firm from Pasadena. Add to that growing list Nissan North America, Jamba Juice, Numira Biosciences, Chevron and Kubota Tractor and it’s easy to see why continuing to target manufacturers with lawsuits is a losing choice for the California economy.

Rather than running to the courthouse in pursuit of a failed legal strategy that will do nothing to help the environment, public officials should join with manufacturers in addressing the problem of climate change. This approach is already producing results. For example, Bloomberg reported last year that the five biggest energy manufacturers reduced their emissions by an average of 13% between 2010 and 2015, outpacing the U.S.’s 4.9% reduction over the same time span. Overall, manufacturers have reduced their emissions by 10% while increasing their overall value to the economy by 19% over the last decade. That progress is commendable.

Manufacturing is too critical to the California economy to continue threatening it. More than 10% of the state’s total economic output and about one in twelve workers depends on California’s $300 billion plus manufacturing sector. With businesses already fleeing high taxes and a less-than-welcoming business environment, the time is now to work toward productive solutions that both help the environment and protect manufacturing jobs. If California wants to avoid a gloomy economic future, local leaders must say no to public nuisance lawsuits that jeopardize manufacturers and the jobs they provide to hard-working Californians.

Whit Peterson is Director of Government Affairs, Greater Irvine Chamber

The “California Miracle” Economy Is a Fantasy


EconomyDemocrats and their MSM allies have been touting California’s “miracle comeback” from the recession. They love to reference 2015 statistics – the SINGLE year when CA did quite well compared to the other states. But as we’ll see below, three things are apparent:

1. 2015 was an aberration.

2. Since 2105, CA has slipped back into its moribund economic performance that has become the norm in the Golden State.

3. By just about any metric, CA is doing less well than the majority of the other states. Too often a LOT less well.

California’s unemployment rate (September, 2018) has improved significantly this year. Yet we are now tied for 32nd – with a 4.1% unemployment rate. The national unemployment rate is 3.7%.  The CA unemployment rate is 12.5% higher than the average of the other 49 states.

It gets worse. Using the lagging yet arguably more accurate U-6 measure of unemployment (includes involuntary part-time workers), CA is the 5th worst – 9.2% vs. the national rate of 8.1%. The national U-6 not including CA is 8.0%, making CA’s U-6 15.7% higher than other states. Remember: The federal standard used to count a worker as “employed” is working ONE hour per week. CA is indeed the “gig economy.”

Another factor to consider: This past year the number of Californians in the work force (employed and unemployed) remained stagnant – essentially a zero net increase in our Golden State pool of workers. Meanwhile the national work pool grew 0.5%. With no increase in workers, our CA unemployment improvement appears better than it really is. If our work pool had grown at the national rate, we’d have a considerably higher unemployment rate.

Yes, the number of California jobs has grown these past 12 months.  But the average job growth in the other 49 states is more than TRIPLE the rate of California’s jobs growth.

But wait – California has the 5th largest economy in the world! Aren’t we doing great compared to the other states? Short answer: no.

Longer answer: CA is a huge state with a HUGE population — over 38%% more people than the second most populous state of Texas. And CA has an uber-HIGH cost of living. Based just on GDP, CA does indeed rank as the 5th largest economy in the world. But adjusted for population (per capita) and cost of living (using the “Missouri” COL index in the URL below), CA ranks lower than all but 13 U.S. states.

Stated differently, if one took the GDP of an aggregation of randomly selected states whose total population roughly equaled California’s 40,000,00 people, and adjusted for those states’ cost of living, then they would likely have the 5th largest economy in the world — if not higher!

Liberals love to denigrate Texas, a “backwater state” which supposedly can’t keep up with the California juggernaut. Sadly for progressives, facts prove them wrong.

In the report below, there’s a comparison of job growth by state from September 2017 to September 2018. California jobs grew 81,100. But TEXAS jobs grew 251,500. Soooo, even though CA has a population that’s 38.6% larger than Texas, the Lone Star State created over TRIPLE the number of jobs that CA produced. As a percent of population, CA ranks a dismal 37th in the percent of job growth compared to the other states. And BTW, the population of Texas is growing over TWICE as fast as CA – and has been for years.

Another disheartening fact: Since the start of the recession (September 2007), the predominant CA job growth above pre-recession levels has been in low paying occupations. The top three dominating occupations – with the job growth in excess of 2007 levels, and the average salary:

  • Food Service *** 350,000 *** $22,000
  • Health Care *** 340,000 *** $66,300
  • Social Assistance *** 305,000 *** $19,100

Moreover, four occupations have failed to gain back all the jobs lost since 2007. All four are in high paying industries:

  • Logging and mining: $116,300
  • Construction: $67,700
  • Finance and Insurance: $123,100
  • Manufacturing (worst hit): $92,900

 

Of course, no discussion of California’s economy is complete without considering California’s sky-high cost of living – and the resulting hardship on the poor – the folks that the Democrats supposedly care so passionately about. California’s real (“supplemental”) 2017 poverty rate (the new Census Bureau standard, adjusted for the COL) is still easily the worst in the nation at 19.0%. We are 43.9% higher than the average for the other 49 states. Texas is 14.7%. The CA poverty rate is 34.6% higher than Texas.

Here’s a thought: The median Texas household income is 13.5% less than CA. But adjusted for COL, Texas’ 2015 median household income is 29.3% more than CA.

If the progressives still feel compelled to tout California, perhaps they should boast about the Golden State’s homeless rate – easily tops on the nation. Maybe they DO love the poor – and that’s why they produce so many of ’em in our “Workers’ Paradise”!

To see a more periodically updated, annotated set of facts comparing CA with the other states – using 35 criteria – check out my dreary online fact sheet.

Middle class is disappearing in California as wealth gap grows


PovertyCalifornia made major news this month, surpassing Britain and reclaiming a valuable economic marker as the fifth largest economy in the world. Its post-recession growth is accelerating under President Trump’s administration and the state even turned in a modest surplus.

However, the state remains one of the most unequal in the nation — one that has both billions of dollars in Silicon Valley and rampant homelessness. The Golden State’s efforts to eliminate poverty instead accentuates it, and its tax system inadvertently aids those who are already wealthy. With the middle class leaving in droves, California’s society represents a neo-feudal mix of robber barons and poor. It’s an unsustainable mixture.

California has a gross domestic product of more than $2.7 trillion. This represents about 13.9 percent of the national U.S. economy. The topline numbers are a bit misleading, as the state represents a similar 12.1 percent of the national population.

California represented the world’s fifth largest economy before the recession, falling to 10th largest in 2012 while growing at an anemic 0.1 percent per year. The state has been fortunate to be the center of the tech and internet sectors, which represent almost 10 percent of the total. Part of the growth was due to a rapidly expanding real estate sector, which heavily benefits wealthy residents. …

Click here to read the full article from The Hill

Consumer Confidence Rises to 18-Year High


ShoppingAmericans’ consumer confidence rose in August to the highest level in nearly 18 years as their assessment of current conditions improved further and their expectations about the future rebounded.

The Conference Board reported Tuesday that its consumer confidence index rose to 133.4 in August, up from a reading 127.9 in July. It was the highest reading since confidence stood at 135.8 in October 2000.

Consumers’ confidence in their ability to get a job and the overall economy are seen as important indicators of how freely they will spend, especially on big-ticket items such as cars, in coming months. Consumer spending accounts for 70 percent of economic activity. …

Click here to read the full article from the Associated Press

Bay Area Has Become World’s 19th Largest Economy


sanfrancisco3The Economic Institute reported this month that the Bay Area would be the 19th-largest economy in the world, if it were a country, after growing at the fifth-fastest rate of any nation since 2014.

The Bay Area’s nine counties — including San Francisco, Alameda, Contra Costa, Marin, Napa, Sonoma, San Mateo, Solano and Santa Clara — consistently grew faster than the U.S. over the last 20 years. With a GDP of $748 billion at the end of 2017, the Bay Area’s economy now exceeds that of Switzerland and Saudi Arabia.

The Bay Area’s rate of growth, at 4.3 percent compounded from 2014 through 2017, was also about two and a half times faster than the 1.7 percent growth of the United States. Due to that persistent growth advantage, the Bay Area’s GDP per capita is almost $80,000, versus less than $55,000 in GDP per capita for the nation as a whole.

Bay Area employment grew slower than the U.S. economy from 2008 to 2011, but has recently ramped up. The fastest Bay Area job growth sectors in the Bay Area were healthcare. up 26 percent; professional and scientific professions, up 25 percent; accommodation and food industries, up 17 percent; and information technologies, up 14 percent.

Bay Area median wages in 2017 were the highest in the nation at $52,100, versus $50,300 for Boston and $39,800 for Los Angeles.

The Economic Institute credits the Bay Area’s highly educated population as a key competitive advantage. With a metropolitan area national high of 46 percent of resident adults over the age of 25 with a college bachelor’s degree, the Bay Area’s average educational achievement towers over the 31 percent average for the U.S.

Although the Bay Area is often referred to as Silicon Valley, the economy is broadly diversified, compared to New York, which is heavily concentrated in financial services and consumer goods. In addition to tech companies, the Bay Area is home to leading companies in financial services, consumer goods, and other sectors.

This article was originally published by Breitbart.com/California

Gov. Jerry Brown’s last budget grows to $199 billion


Gov. Jerry Brown is using a surging, $8.8 billion surplus in his 16th and final year leading the state to stash billions of dollars in reserves.

He wants to put almost all of the additional money — $7.6 billion of it — into two reserve funds that combined would hold $17 billion a year from now if trends hold.

He warned at a press conference Friday where he unveiled his final budget for the 2018-19 financial year that a recession could be just around the corner and the state should avoid long-term commitments that it might not be able to afford in a downturn.

“This is a time to save for our future, not to make pricey promises we can’t keep. I said it before and I’ll say it again: Let’s not blow it now,” Brown said.

His plans calls for $137.6 billion in general fund spending and $199.3 billion in total spending. Those sums reflect the dramatic turnaround in the state’s fortunes since Brown took office in the throes of a recession eight years ago. …

Click here to read the full article from the Modesto Bee

California Passes UK to Become World’s 5th Largest Economy


EconomyCalifornia zipped past the United Kingdom to become the 5th largest economy in the world in 2017.

The U.S. Commerce Department reported that California with a population of 39.54 million has a larger Gross State Product at $2.75 trillion, versus the United Kingdom with a population of 65.64 million and a Gross Domestic Product of $2.62 trillion.

A big advantage California enjoys is having a surface area of 163,696 square miles, compared to the UK with just 93,628 square miles of area. Although almost a third of California is uninhabited, about the same one-third of the UK is uninhabited.

Setting a new all-time highest ranking versus the world is a huge change from 2012 when huge swaths of California real estate was getting foreclosed and thousands of cars were getting repossessed. This knocked the not-so-golden state to a world economic ranking of #10.

But California’s Gross State Product jump by $700 billion and created 2 million jobs in the last six years. A huge piece of that recovery has been due to globalism, with the U.S. Commerce Department reporting that California exported $171.9 billion to 229 foreign economies in 2017.

Outstanding performing export sectors were Silicon Valley which passed $30 billion, Hollywood entertainment hitting about $16 billion, and the state’s agricultural sector recording a near-record $20 billion in exports.

The chief economist at the California Department of Finance Irena Asmundson told the Associated Press that California’s economy since the lows in 2012 hit new highs in 2017 that included $26 billion for financial services and real estate; $20 billion for the information sector; and a decade-high $10 billion in manufacturing.

Asmundson added that during the five-year period, California with 12 percent of the U.S. population created 16 percent of all new domestic jobs and the state’s share of U.S. Gross Domestic Product grew from 12.8 percent to 14.2 percent.

California’s unemployment rate was at a 17-year low of 4.8 percent in 2017 and has steadily declined to 4.3 percent at the end of March to set a 38-year low, according to the state’s Employment Development Department.

But not everything is great for all Californians, with Breitbart News reporting that Silicon Valley has the highest income inequality in the nation and the U.S. News & World Reportnaming California as the worst state for “quality of life,” due to the high cost of living.

If California was a nation, the only countries left to pass would be Germany with a GDP of $3.69 trillion, Japan with a GDP of $4.87 trillion and China with a GDP of $12.02 trillion. Then the Golden State could try to pass United States that has a GDP of $16.64 trillion, without California.

This article was originally published by Breitbart.com/California

‘Trump bump’ rescues California’s unemployment fund


donald-trump-2America’s economic recovery has benefited California more than most states because the real estate crash hit the Golden State a lot harder. In other words, we’ve had to claw our way up from a deeper hole.

The good news is that the strength of the recovery is impressive. Hourly wages have jumped by four dollars since the start of the Great Recession. Unemployment has dropped to 4.3 percent, a record low since 1976 when California started keeping track of the data. The new $190 billion general and special fund budget that Gov. Brown proposed last month is an all-time record and $26 billion more than just two years ago. By any metric California’s economy, the 5th largest in the world, is strong.

While California’s progressive legislators seize any opportunity to trash President Trump, the undeniable truth is that most Californians will benefit from the federal tax-reform bill both from increases in their paychecks as well as largess from their employers handing out raises and bonuses.

There is also good news for the state’s businesses community, which will see lower payroll taxes. Back in 2001, the state Legislature — in a decidedly short-sighted move — increased unemployment insurance benefits to a maximum amount of $450 a week for 26 weeks. Increasing benefits by that amount without increasing payroll taxes was a recipe for disaster. That disaster struck with the onset of the recession in 2008. One year later, the state depleted its unemployment insurance fund reserve and went into insolvency, where the fund remains today. In order to continue paying out unemployment benefits, California borrowed $10.2 billion from the federal government between 2008 and 2012.

Under law, California is prohibited from repaying the loan principal out of general or special funds, but can repay the interest due the federal government. The only way to repay the loan back is either by increasing payroll taxes or decreasing benefits. Because California politicians could not reach agreement on how to solve this problem, the federal government acted for them, automatically increasing payroll taxes to settle the debt.

The consequences of the insolvency of the Unemployment Insurance Fund have been dramatic for California businesses and taxpayers. According to the non-partisan Legislative Analyst’s Office, California will end up paying nearly $1.5 billion in interest payments to the federal government out of the state’s general fund. And California employers are estimated to have paid over $2.5 billion in increased federal payroll taxes in 2017 alone, solely for the purpose of making the fund solvent. Increased wages and job growth from the “Trump bump” have helped to repay this loan quicker then might otherwise have been possible.

The unemployment insurance debacle is yet another example of the federal government riding to the rescue and bailing us out. The good news for California employers is that the federal loan will be paid off sometime this year, meaning more money can be invested in businesses and returned to workers.

However, the respite may be short-lived. As is inevitable in the cyclical nature of economies, what goes up must come back down. The nine-year expansion of California’s economy will not last forever and may already be starting to contract. In order to avoid yet another structural budget problem (see also: the general fund and unfunded pension liabilities) it is imperative the Legislature act now to restore sustainable benefit levels before the next recession. Otherwise, the Trump administration may once again have to bail out California.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This article was originally published by the Orange County Register

California Second Worst State for Economic Freedom


A new international report has found that due to the burden of regulatory overreach and the highest taxes in the nation, California ranks 49th out of all 50 U.S. states in economic freedom. Only New York is worse.

When Canada’s Fraser Institute published its 2017 “Economic Freedom of the World” survey in September, the index surprisingly found that the United States suffered the third-worst plunge in economic wocalifornia-flagrld freedom (EWF) between 2000 and 2015, by falling 7 places from number 4 to number 11.

The index measures individual components for 1) the size of government and tax rates; 2) impartiality of the legal system and protection of property rights; 3) sound money and inflation; 4) freedom to trade; and 5) regulatory reach and costs.

Co-author Fred McMahon commented, “The freest economies operate with comparatively less government interference, relying more on personal choice and markets to decide what’s produced, how it’s produced, and how much is produced.”

Researchers at the Fraser Institute teamed with the U.S.-based Independent Institute’s Center on Entrepreneurial Innovation to gain insight into how much of America’s dismal loss of competitive standing was caused by California’s two-decade lurch to the left.

What they found is that California is now the second-least economically free state, with a score of 5.8 out of 10. That is about 30 percent lower than New Hampshire — America’s most economically free state, with a score of 8.3. New York continued to capture the booby prize for the least economically free with a score of 5.3.

To give a sense of just how far California has fallen, the nation of Mexico has a score of 6.17, or about 6.4 percent higher than California.

Independent Institute Senior Fellow Dr. Lawrence J. McQuillan stated that California has become so toxic for economic opportunity that 10,000 businesses left the Golden State, reduced operations, or expanded elsewhere over the last 7 years. Census data reveal that 3.5 million residents left California for greener pastures from 2010 to 2015.

Breitbart News recently reported that California continues to lead America in poverty, with 20.4 percent of residents in poverty, according to data released by the Census Bureau. With about 46,686,000, or 14.7 percent, of U.S. residents living in poverty, California, with 7,946,000, accounts for about one in six U.S. residents living in poverty.

According to David J. Theroux, Founder and President of the Independent Institute, “The 2017 report shows the public, news media, and policymakers in Sacramento what changes need to be made to make California competitive in the future.”

This article was originally published by Breitbart.com/California