California now has the highest jobless rate in the country, at 5.3% in February. This is because new data showed that job growth in the state with the most people was much slower than thought last year.
A huge 2.7 million jobs were lost in California at the start of the coronavirus pandemic. Many businesses had to close because of Gov. Gavin Newsom’s “stay at home” order.
The Employment Development Department of the state says that since then, the state has added more than 3 million jobs, which is an amazing rate of just over 66,000 new jobs per month.
But the federal government recently looked at data on unemployment and found that job growth slowed down a lot last year. Every month, the federal government puts out a list of jobs that state governments use to figure out how well the economy is doing. The federal government looks at these numbers every year to see if they match up with salary records. Usually, the changes are small and don’t change how people see the business as a whole.
But this year, the numbers were wrong. The original report said California added 300,000 jobs from September 2022 to September 2023, but new numbers released earlier this month show the state only added 50,000 jobs during that time.
A professor of finance and economics at Loyola Marymount University named Sung Won Sohn said, “I think California’s economy is the front line of the national economic slowdown.”
It’s hard to guess how many jobs there are. The number comes from polls of workers done every month. According to an analysis by the nonpartisan Legislative Analyst’s Office in California, the survey overestimated job growth in some sectors. The biggest difference was seen in the professional services category, which includes lawyers, accountants, and engineers, who often make a lot of money.
In July of last year, early estimates showed that California gained 9,900 jobs. But after the numbers were fixed, it was found that the state lost 41,400 jobs that month.
People lost their jobs in seven of California’s eleven job areas in February. The biggest drop was in building, where 9,600 jobs were lost because of the problems caused by the strong storms that hit the state in February. The state Employment Development Department says the job losses would have been much worse if the health care sector hadn’t done so well. This was mostly due to job growth in fields like acupuncture and dieting.
During the pandemic, California’s economy grew very quickly thanks to billions of dollars in government aid and a stock market that went crazy, which fueled fast growth in the tech industry. It looks like the tech companies hired too many people too fast.
“Big tech companies hired too many people in the first year after the pandemic, and they’ve been letting people go ever since,” said Michael Bernick, who used to be the director of the California Employment Development Department and is now an attorney at the Duane Morris law firm. “The (San Francisco) Bay Area is now the center of business for AI startups.” But these new businesses are only making a few jobs so far.
The state’s budget has a multibillion-dollar shortfall for the second year in a row because of the slowdown in the economy. The nonpartisan Legislative Analyst’s Office and the Newsom government have different ideas about how big the deficit is. In January, the Newsom government said the deficit was $37.9 billion. The LAO says it could be as much as $73 billion, though.
The governor and the state legislature usually finish the first draft of the budget for the state in June. But this year, the deficit is so big that Newsom has been talking with congressional leaders about what they can do right away next month to cut the deficit before the April tax deadline. That’s when state officials will have a better idea of how much money they have to spend.
Mike McGuire, the Democratic leader of the state Senate, said that he thinks lawmakers need to cut the debt by at least $17 billion.
McGuire said, “The faster we move, the better it is for California.” “We will have to give up some things.” We can get this deficit down to a more manageable level, though, if we move quickly.
