To no one’s great surprise, California joblessness has increased to 8.2%, and most economists figure it will get even worse in the months to come. The state now ranks third in the nation for unemployment, thanks to over 100,000 job losses in the last year:
California’s unemployment rate soared to a 14-year high in October, hitting 8.2%, and economists predicted that it could rise substantially over the next year and a half.
The state’s economy shed 26,400 people from its payroll last month, raising the total number of lost jobs to 101,300 since October 2007, the California Employment Development Department reported Friday.
And the situation is about to get worse, predicted Ross DeVol, director of regional economics at the Santa Monica-based Milken Institute. The unemployment rate is seen reaching 9.9% in the first quarter of 2010, with the loss of 360,000 more jobs before then.
The hemorrhaging of jobs is “another indication that the state is plunging into what is likely to be a long and deep recession,” said Stephen Levy, chief economist and director of the Center for the Continuing Study of the California Economy in Palo Alto.
Unemployment rose for the nation as a whole, so an increase in the percentage for any state won’t shock anyone. However, California’s high rate only got surpassed by Michigan and Rhode Island in October. The number of people unemployed in California has risen by almost 50% over October of last year. Their unemployment fund was in “crisis” last month because of the rapid expansion of the unemployed, meaning that the state will have to borrow even more funds to pay its entitlement obligations.
Why do economists expect it to get worse? California’s warm climate may attract hundreds of thousands to visit each year, but its business climate keeps getting colder and colder. The state already has the sixth-highest tax burden per capita among states, and the state government has already proposed a tax increase to combat a shortfall this year. The LAT article states that this is a “consumption” recession, meaning that uncertaintly has stopped consumer spending. A sales-tax increase to over 9% will only make that worse.
California, and the federal government, both propose to raise taxes in a recession. That’s a recipe for disaster, and in California’s case, more capital flight to warmer business climates in other states. Both need to start curtailing spending and provide tax relief to stimulate business and job growth. Otherwise, California will return to the Jimmy Carter era, and sooner than we expected.