Will California job losses equal the Great Recession? This economist says it will be worse

Just a couple of weeks ago, economists were saying the coronavirus pandemic could drive unemployment rates in California to 12 percent or higher, rivaling the worst the state endured during the Great Recession.

If only that were true.

In a stunning report Wednesday, economist Jeff Michael of the University of the Pacific said California’s unemployment rate could reach 18.8 percent by May, with more than 3 million jobs erased.

If his prediction proves accurate, California would face a downturn of the severity not seen since the Great Depression, when unemployment hit 25 percent.

But with much of the economy abruptly shut down, in California and most other states, by mandatory “stay at home” orders, experts say the impact on jobs has already been historic. Bars and almost all retailers are closed, restaurants are limited to takeout only, and tourism and entertainment venues have been idled.

Michael said Sacramento-area unemployment could hit 18.5 percent and Fresno 20.7 percent. Modesto would see a rate of 20.2 percent and the jobless figure will hit 20.5 percent in Merced.

The Bay Area, with its high tech economy, will fare slightly better. San Francisco unemployment will reach 17.1 percent and San Jose 15.3 percent, Michael said.

While the trajectory of the downward spiral is fairly clear, the big unknown is how quickly the economy will snap back.

Michael said in an interview that he believes the economic recovery will be much swifter than the last recession, when the real estate bust left Sacramento and most California cities facing a multi-year ascent. Once the health crisis passes, “the pace of people returning to work will be quicker than previous (economic) cycles,” he said.

But it won’t be instantaneous.

“It will not come back as quickly as the decline was,” Michael said.

He said greater Sacramento in May will be home to 221,000 fewer jobs than it did a year earlier. The entire state will lose 3.8 million jobs compared with 2019.