Gavin Newsom, the Governor of California, often finds himself on stage, delivering what appears to be a never-ending stream of boasts about the Golden State. It’s not uncommon to hear him declare that California holds the title for being at the forefront of various economic and cultural metrics. But as charming as these proclamations might be, there’s a growing sense that they often collide with the harsh realities facing the state’s economy.
Take, for instance, Newsom’s 2022 announcement of a remarkable $97.5 billion budget surplus—a figure that sparked widespread excitement. In his exuberance, he claimed, “No other state in American history has ever experienced a surplus as large as this.” However, this claim was soon called into question. A revision of revenue estimates revealed that the surplus was overstated by a staggering $165 billion over just four years, resulting in significant multibillion-dollar budget deficits.
Despite these miscalculations, Newsom’s penchant for boasting shows no signs of abating. Recently, he proclaimed that if California were a nation, it would boast the world’s fourth-largest economy, valued at an astounding $4.1 trillion—surpassing Japan in the process. “California isn’t just keeping pace with the world — we’re setting the pace,” he stated, attributing this economic position to the state’s commitment to investing in people, sustainability, and innovation.
While such figures sound impressive, the interpretation does not wholly capture the state’s economic dynamics. The apparent edge over Japan largely stems from currency exchange fluctuations rather than productivity growth. Beneath the surface of this lofty valuation lies a disquieting truth: California’s economy is, by many indicators, simply limping along.
A report by Gabe Petek, the Legislature’s budget analyst, highlighted that California’s economy has been in a prolonged slowdown for nearly two years. “Characterized by a soft labor market and weak consumer spending,” Petek noted, this slowdown has persisted, although it hasn’t reached recession-like depths. “Outside of government and health care, the state has added no jobs in a year and a half,” he reported.
This assessment is corroborated by data from April, where California’s unemployment rate stood at 5.3%, placing it among the highest in the nation. Contrasted with other states, only Michigan and Nevada fared worse. The rate has stagnated at this elevated level for several years, leading analysts to conclude that it’s reflective of deeper, systemic issues within the state.
According to Beacon Economics, since February 2020, California’s labor force has grown by only 126,100 workers—a mere 0.6% increase. This stagnation can largely be attributed to chronic housing shortages and the retirement of older workers. Justin Niakamal, Beacon’s research manager, stated that the lack of housing production stands as a fundamental barrier to breaking this slow-growth cycle. “This is an elemental problem that is impacting the state’s ability to grow its population, industry, and economy.”
An excellent case study of California’s economic challenges can be seen in the San Francisco Bay Area, particularly within its esteemed technology sector. Historically, this industry has been the backbone of California’s economy, experiencing expansion amidst the COVID-19 pandemic as companies adapted to remote working conditions. Yet, this growth has turned into contraction, with job losses accumulating month after month.
While Newsom cited favorable statistics from the federal Bureau of Labor Statistics to support his claims about California’s economic stature, he conveniently omitted mention of a recent report detailing the state’s troubling employment landscape. That report disclosed that California has over one million unemployed individuals, with the highest ratio of jobseekers to job openings in the nation—a staggering 1.6 jobseekers for every available job. If every job opening were filled, there would still be hundreds of thousands of unemployed Californians left searching for work.
In sum, the narrative painted by Governor Newsom raises questions about the actual state of California’s economy. While the boasting may paint a rosy picture, the underlying statistics reflect a more sobering reality. California is at a crossroads—one that necessitates a pragmatic approach to overcoming the challenges of housing shortages, labor market sluggishness, and an economy that appears to be treading water.
In closing, the disconnect between the boastful proclamations of California’s leadership and the lived experience of its residents underscores a pressing need for strategic action. Recognizing the placeholders in economic policy and addressing the state’s foundational issues will be key to breaking free from this cycle of stagnation and fostering an environment where the Golden State can genuinely thrive once again.
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