California sends contradictory economic signals

Your guide to California policy and politics
Emily Hoeven BY Emily Hoeven October 26, 2022
Presented by Dairy Cares, Climate-Smart Agricultural Partnership and Southern California Gas Company

California sends contradictory economic signals

When it comes to California’s economy, the numbers tell wildly different and seemingly incompatible stories — leading to competing narratives ahead of the Nov. 8 election as residents identify jobs, the economy and inflation as the top issues facing the state.

Take GDP: On the one hand, Gov. Gavin Newsom is trumpeting a Bloomberg opinion piece that argues California is poised to overtake Germany in GDP growth and become the world’s fourth largest economy. “While critics often say California’s best days are behind us, reality proves otherwise,” the governor said in a statement.

The California Business Roundtable — which often accuses Sacramento of pursuing policies that place undue burdens on businesses — sees it differently, arguing in a recent press release that the Golden State is unlikely to pass Germany and only achieved its fifth-place spot due to “contraction of the UK economy in the wake of Brexit.”

  • The industry group continued: “California’s competitiveness is hampered by its ongoing cost-of-living crisis. … The high and growing costs of housing, energy, food and other essentials means the dollar here does not go as far as it does in other countries.”
  • If GDP is adjusted to account for purchasing parity, California would be 11th nationally, “struggling to stay above Turkey,” according to the group.

Take (un)employment: California’s unemployment rate fell to 3.9% in September, tying July for the lowest rate recorded in a data series stretching back to 1976, the state’s Employment Development Department announced Friday. Newsom’s office applauded the 0.2% drop from August’s jobless rate of 4.1%, noting that California in September “also added jobs for the twelfth consecutive month and has now recovered 99.1% of jobs lost to the pandemic-induced recession.”

But California’s unemployment rate fell “only because the number of Californians in the labor force also declined” on a seasonally adjusted basis by nearly 48,000 people, Michael Bernick, a former EDD director and attorney at Duane Morris, told me in an email. He added that the Golden State’s gain of 6,500 payroll jobs in September was “far below” the more than 60,000 jobs it averaged adding per month through July, and only two sectors — education and health services and leisure and hospitality — saw “significant” job gains.

  • Bernick: “Interest rate hikes are driving layoffs in finance and related business service positions. The unusual job dichotomy in the state continues: hiring freezes and layoffs in white collar positions and continued worker shortages in direct care and direct service positions.”

Take economic health: Despite the ravages of the pandemic, California’s poverty rate fell from 16.4% in 2019 to a projected 11.7% in fall 2021, largely due to expanded federal and state social safety net programs, according to a Tuesday report from the Public Policy Institute of California. But more than a quarter of Californians are still living in or near poverty, the study found.

Another Tuesday report from PPIC gave off similarly mixed signals. It found that:

  • Although unemployment rates across racial and ethnic groups are nearing pre-pandemic levels — with Latino and white Californians actually experiencing lower jobless rates — unemployment has increased among Asian and Black Californians, which “could suggest equity concerns amid ongoing economic volatility.”
  • For the first time in decades, California has more job openings than job seekers — which has expanded opportunities for workers and driven up wages but simultaneously limited businesses’ growth and increased prices.
  • Although private-sector workers’ wages have increased 14% since 2020, they’ve actually fallen 1.3% once adjusted for inflation.

Time to vote: Find out everything you need to know about voting before California’s election ends Nov. 8 in the CalMatters Voter Guide, which includes information on races, candidates and propositions, as well as videos, interactives and campaign finance data. And if you missed CalMatters’ event last week on the seven ballot measures, you can watch it here and read a brief recap here.


1 How would a windfall profits tax work?

A Valero gas station in Sacramento on March 10, 2022. Photo by Miguel Gutierrez Jr., CalMatters
A Valero gas station in Sacramento on March 10, 2022. Photo by Miguel Gutierrez Jr., CalMatters

Newsom took his fight against oil and gas companies up a notch on Tuesday, citing Valero’s $2.82 billion in profits from July to September — up from $463 million during the same period last year — as proof that California should enact a windfall profits tax on the industry and return the excess money to consumers. “Big oil is ripping Californians off, hiking gas prices and making record profits,” Newsom said in a statement. “As Valero jacked up their profits by over 500% in just a year, Californians were paying for it at the pump instead of passing down those savings.”

  • There’s been a lot of talk about a windfall profits tax lately — but how exactly would it work, given that no state has enacted one before? And has it achieved its intended purpose in other countries that have given it a try? CalMatters’ Grace Gedye takes a closer look.

Meanwhile, California gas prices are dropping at a near-record rate, with the average price for a gallon of regular cresting $5.71 on Tuesday, down from more than $6 last week, according to AAA. Newsom’s office attributed the steep decline to “the governor’s actions,” including allowing refineries to begin producing cheaper winter-blend gasoline earlier than usual.

2 Sports betting measure fails to qualify for 2024

Image via iStock
Image via iStock

Depending on how you look at it, the future of sports betting in California just got more or less complicated. Late last week, the supporters of a proposed 2024 initiative to permit Native American tribes to operate both in-person and online sports betting announced that they had failed to gather enough signatures to put it on the ballot. The campaign behind the measure — sponsored by a coalition of California tribes — said through spokesperson Roger Salazar that “we made a strategic decision this year to concentrate our full resources on defeating Proposition 27,” one of two dueling measures to legalize sports betting on the November ballot.

  • Prop. 27 would allow licensed tribes and large, well-established gaming companies to offer mobile and online sports betting for adults 21 and older outside Native American tribal lands. 
  • Prop. 26 would allow Native American casinos and California’s four horse race tracks to offer in-person sports betting.

2022 Election

Latest coverage of the 2022 general election in California

Polls suggest that both Props. 26 and 27 are likely to fail even after the campaigns on both sides of the initiatives raised more than $440 million. The backers of the two measures have admitted their likely defeat, even as they gear up for the next iteration of the battle.

  • Salazar: “After the November election, we will regroup with California tribes and other key stakeholders to develop a 2024 sports wagering initiative that provides the best options for tribes and all Californians.”

3 Shake it off

A seismograph report at Lick Observatory shows the readout of a magnitude 5.1 earthquake east of San Jose, on Oct. 25, 2022. Photo by Karl Mondon, Bay Area News Group
A seismograph report at Lick Observatory shows the readout of a magnitude 5.1 earthquake east of San Jose on Oct. 25, 2022. Photo by Karl Mondon, Bay Area News Group

The 5.1-magnitude earthquake that struck near San Jose on Tuesday served as a rattling reminder of the value of communication during natural disasters: About 100,000 people received a notification from the Earthquake Warning California app before shaking started, Brian Ferguson, deputy director for crisis communication and public affairs for the California Governor’s Office of Emergency Services, told CNN. The office urged residents to sign up for early warnings, noting that “these alerts can provide valuable seconds of life-saving notification before you feel the ground shaking.” Newsom’s office also tweeted a link to the app. No significant damages or injuries related to the earthquake were reported Tuesday.

  • California is also offering grants of as much as $3,000 for eligible homeowners to seismically retrofit their homes in preparation for the next big quake. Registration is open through Nov. 29, though the website warned Tuesday that applicants may experience delays due to “unusually high site traffic.” The state aims to offer at least 15,000 grants in more than 500 at-risk ZIP codes, according to the San Francisco Chronicle.

Meanwhile, state regulators on Tuesday unveiled a proposed $155.4 million fine for PG&E shareholders for violations related to the 2020 Zogg Fire in Shasta County, which killed four people and destroyed more than 200 structures. PG&E now has 30 days to decide whether to pay the penalty or to request a hearing.


CalMatters Commentary

CalMatters columnist Dan Walters: Kevin de León began his political career as a proponent of immigrants’ rights, but somewhere along the line he morphed into careerist self-absorption.

Proposal for zero-emission trucks misses the mark: The California Air Resources Board is poised to adopt a mandate that will increase costs, erase working-class jobs and strain our overburdened electrical grid by pushing for too much, too fast, argues Chris Shimoda, senior vice president of government affairs for the California Trucking Association.

Homeless service providers need help, too: Newsom, the Legislature and many others rely on us to address California’s homelessness crisis, but these same officials have not provided our sector with stable or sufficient resources to sustain skilled and experienced staff, writes Kenyaun Christie, associate director at Larkin Street Youth Services.

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A big-money mayor’s race is shaping up to be a fight for the soul of Silicon Valley. // San Francisco Chronicle

Ex-Anaheim mayor refuses to disclose emails amid FBI corruption investigation. // Los Angeles Times

How Supreme Court decision on affirmative action could affect California private colleges. // EdSource

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Patients died from COVID-19 drug treatment at two California hospitals, suits allege. // Mercury News

Multiple Bay Area health care strikes reflect a workforce decimated by labor shortage. // KQED

Adjuncts sue California community college system over unpaid work hours. // EdSource

Life and death row: A California prison murder ripples through time. // Los Angeles Times

S.F.’s answer to safety concerns is more community ambassadors. // San Francisco Standard

San Diegans are falling into homelessness faster than the region can house them. // Voice of San Diego

Bay Area is the only California region where homes are selling for less than last year. // Mercury News

Why did Cotopaxi leave San Francisco? // The Atlantic

See you tomorrow


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