While Gov. Gavin Newsom polishes his foreign policy credentials with visits to Israel and China, California is experiencing an economic slowdown that could bode ill for the final three years of his governorship.
The state’s latest employment report, issued last week for September, found fewer Californians employed than there were a year earlier, while the jobless ranks had increased by 144,100. The state’s unemployment rate creeped up to 4.7%, the second highest of any state, while the labor force — Californians working or looking for work — continued to decline.
“Census figures released this week reveal the extent to which households continue to leave California,” Taner Osman, research manager at Beacon Economics, said in an analysis of the job data. “The state’s population has fallen by half-a-million people over the past three years and this is filtering through to the economy, where the labor force has shrunk and employers are struggling to find workers.”
The darkening employment picture is particularly evident in the San Francisco Bay Area, traditionally the state’s most prosperous region, whose high-income technology workers have been a major source of income taxes.
The San Jose Mercury News calculated that the nine-county region has seen declining employment for three straight months as technology companies shed staff.
“The Bay Area economy may have shifted from just treading water to a period of backsliding under the weight of higher for longer interest rates, slowing consumer and business demand, and weaker growth in Asia and around the globe,” Scott Anderson, chief U.S. economist for BMO Capital Markets, told the Mercury News.
The state’s population loss, cited by Osman of Beacon Economics, has taken on a new and ominous aspect, according to recent research by the Public Policy Institute of California. In the past, PPIC’s demographers have said that losses generally were in lower-income Californians seeking lower costs of living. But they now see a significant outflow of higher-income workers and their families — the people who generate the lion’s share of California’s tax revenues.
The PPIC found that “an increasing proportion of higher-income Californians are also exiting the state. The ‘new normal’ of remote work in many white-collar professions has enabled some higher-income workers to move. Politics might also play a role, as conservatives are much more likely than liberals to say they have considered leaving the state.”
