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California’s economy booming, but the future looks cloudy

(Menafan – EIN Presswire)

in short

Although 2022 was a strong year for California’s economy, with impressive job growth, the state’s economic future has become cloudy.

Last year was a strong year for California’s $3.4 trillion economy.

The state added 621,400 jobs, eventually reclaiming the nearly 3 million that were initially lost during the COVID-19 pandemic as Gov. Gavin Newsom closed key economic sectors. The year ended with unemployment at a nearly record-low 4.1%.

“California continues to lead the nation’s economy,” bragged Newsom after the December jobs report was released this month. Earlier he predicted that if California were a nation, it would be close to surpassing Germany as the world’s fourth most powerful economy.

All good In fact, some economists believe that California’s job growth is so strong that only the labor shortage — caused by a decline in the number of Californians looking for work — is a major obstacle to expansion.

This is an economic reverse.

The downside is that no one seems to know whether the good times will continue or the state will experience its periodic recession, which comes about once a decade.

For the past few months, the Federal Reserve System has been attempting to reduce inflation by raising interest rates. Its stated hope is that the economy will cool enough to curb inflation but avoid a sharp decline into recession.

It is not yet clear whether the system’s efforts will work as planned and economists are mixed in their projections of what lies ahead economically for the nation, not only due to the actions of the Federal Reserve but also due to other factors such as the war in Ukraine. Reason too.

Newsom’s proposed 2023-24 budget reflects that uncertainty.

The budget declares, “Inflation and the uncertain future path for Federal Reserve policy pose short-term risks.” Slight slump.

“This could lead to a sharp decline in investment and interest-sensitive consumption, which in turn could lead to a large decline in economic growth and reduce non-employment and personal income growth.”

An analysis by the Public Policy Institute of California states, “The greatest economic threat is continued inflation.” Until that happens, the Federal Reserve will continue to take steps to slow the economy, increasing the risk of a recession.

Recession fears and other factors are already impacting the budget, which Newsom and legislators thought was headed for a multibillion-dollar deficit from a nearly $100 billion surplus last summer due to a sharp drop in projected revenue. Taxed by most high-income Californians.

The most powerful engine of California’s economy, and therefore of the state’s revenue stream, is the Bay Area-focused technology industry, whose major firms are rapidly reducing payrolls through layoffs after expanding during the pandemic to allow people to work from home. There can be a change in the existing employment. ,

Despite the layoffs, the sector was still adding jobs during December – in fact California gained 84% of its jobs during the month, confirming the mixed economic signs the state is experiencing.

“We don’t see anything catastrophic with technology,” said Patrick Kellerman, vice president of research at the Bay Area Council Economic Institute. “I don’t see the tech industry collapsing.”

While economists debate the economic future and Capitol politicians debate how to deal with the projected deficit, his constituents are turning sour.

A November poll by the Public Policy Institute of California found high pessimism about the economy, with 69% of Californians surveyed expecting worse times in the next year and 62% expecting high unemployment during the next five years. expect a period of

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