Friday, November 18, 2011

Gridlock in Sacramento Means One Thing: Good News for California's Economy

We're proud of our reputation as a source of grim commentary on the California economy, so the latest news out of the Employment Development Department is throwing us for a bit of a loop. According to the EDD, the state's unemployment rate dropped to 11.7% last month, and all told the Golden State added nearly 26,000 payroll jobs. Taking into account the upward revision in the September numbers, California has created some 86,000 jobs in the past three months. The full report is here.

More specifically, 35,500 new jobs were added in seven sectors of the state's economy: construction, information, finance, professional and business services, educational and health services, leisure and hospitality, and other services. In contrast, almost 10,000 jobs were lost in government (blessedly), manufacturing, mining and logging, and the trade, transportation and utility sectors. Since last October, employment in California is up 1.7%, with a total gain of 240,000 jobs. Claims for unemployment benefits held steady, and new claims for unemployment benefits were up almost 15,000 from September. Most encouragingly, unemployment in California's most populous counties appears to be easing. In northern California, Marin (7.9%), San Francisco (8.1%), San Mateo (7.9%), Santa Clara (9.5%), Alameda (10.1%), Contra Costa (10.0%), Napa (8.3%) and Sonoma (9.3%) counties all had unemployment rates below the state average. The picture is more mixed in southern California: joblessness remains high in Los Angeles (11.9%), San Bernardino (12.8%) and Riverside (13.7%) counties, and post-apocalyptic in Imperial County (28.9%), but below-average in Orange (8.5%) and San Diego (9.7%) counties.

The gradual improvement we're seeing here obviously has many causes. We may not be seeing the schizophrenic growth in evidence during the summer, but the flood of newly printed dollars appears to be finding a home in the VC-connected sectors of the San Francisco and Silicon Valley economies. Still, we can't help but smile when we think back to all the hand-wringing we were hearing from politicians and newspaper columnists in the spring and summer. We know it's hard for everyone to comprehend, but somehow, some way, California's economy may be coming back to life in spite of the failure of Jerry Brown's "jobs plan." That's right: recovery can happen even without renewing taxes on energy and slapping $1 billion in new corporate taxes on out-of-state employers. And could it be that the 1% drop in income and sales taxes that occurred when Brown's tax plan failed was actually a good thing as well? In spite of all the dire warnings we got about the catastrophe that would follow lower taxes, it's almost looking like lowering taxes in a recession is a good thing. The lesson in all this? When Sacramento has trouble getting things done, things start to look up for the rest of us.


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