Every week, it seems, some positive sounding news comes out about California’s economic recovery. But don’t get too happy – there are some dark clouds in that silver lining.
For instance, the statewide jobless rate declined to 5.8 percent in October, down from 7.2 percent in October 2014. Total employment in the state grew by more than 380,000 over the previous year, accounting for more than 20 percent of the entire country’s employment gains, according to the latest employment report from the California Center for Jobs & the Economy.
A significant portion of the decline in unemployment, however, is because many Californians have given up looking for work. Labor force participation in October was barely 62 percent, below the historic low in 1976. For those not around way back then, those were the dark years of “stagflation” – the triple whammy of slow economic growth, high unemployment and rising prices.
Another worrisome trend is a noticeable shift in the kinds of jobs that are available, as some industries shrink and others grow. While California has added 2.1 million jobs since 2010, employment in six industries is still below 2007 levels, before the Great Recession, according to the center’s analysis. Those sectors – including construction, finance and manufacturing – generally pay more than the service-type jobs that we’re adding in droves.
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This change is partly behind the growing gap between coastal California, where high-paying tech jobs are concentrating, and inland California, where six metro areas have among the 10 highest unemployment rates in the nation.
This study comes out of the research arm of the California Business Roundtable, a group of high-powered CEOs. But it echoes the California Budget & Policy Center, which advocates for the poor and emphasizes how income inequality has worsened during the recovery because wages for most workers haven’t grown.
If both ends of the political spectrum agree, the findings must be truly important. That doesn’t bode well for the future of the middle class in California, and that’s not good for anyone.
Last month, I moderated a discussion, hosted by the Budget & Policy Center and featuring a new book, “Hollowed Out: Why the Economy Doesn’t Work Without a Strong Middle Class,” by David Madland of the left-leaning Center for American Progress.
He argues that a strong middle class isn’t only the result of a strong economy, but rather a cause. Madland also says that a thriving middle class isn’t just necessary for a fair economy, but also for a functioning democracy and society. It builds the trust that is essential to do business; leads to a less corrupt government that doesn’t just cater to the wealthy; creates a stable and growing base of consumer demand that creates jobs; and gives opportunity to the children of the poor and working class.
But now, he says, America’s middle class is so weakened that we’re having problems more like a developing nation. “An economy that works only for the rich, simply doesn’t work,” he writes. “To have strong and sustainable growth, the economy needs to work for everyone.”
According to the numbers, that isn’t happening in California despite all the new jobs. As I said, dark clouds on the horizon.
By the numbers
California industries with the biggest changes in the number of jobs between 2007 and October 2015, and the average annual wage:
- Health care and social assistance, $58,600
- Individual and family services, $14,700
- Accommodations and food services, $20,900
- Professional, scientific and technical services, $106,400
- Administrative, support and waste services, $39,700
- Educational services, $49,300
- Manufacturing, $81,500
- Construction, $59,900
- Finance and insurance, $109,400
- Government, $62,500
- Real estate, rental and leasing, $60,200
- Retail trade, $33,400
Source: California Center for Jobs & the Economy