Countdown to May Revise: A Balanced Approach Is the Best Option for California’s Economy

California’s labor market has strengthened in recent months, but the state still has a long way to go. Total nonfarm employment increased by over 200,000 between September 2010 and March 2011, the last month for which data are available. However, these increases have not been enough to bring down the state’s jobless rate, which was still the second highest in the nation at 12.0 percent in March. In the same month, 2.2 million Californians were still unemployed, nearly half of whom had been searching for work for at least six months. Nationally, there were more than four people looking for jobs for every job opening as of February 2011, reaffirming that the reason why the unemployed aren’t finding jobs is not for a lack of trying, but rather because there aren’t enough jobs available. What’s more, the labor market is not expected to fully recover anytime soon: The Legislative Analyst’s Office projects that unemployment will remain at or above 11.0 percent through 2012.

Why has recovery in California’s job market been so weak? One factor is state budget cuts, which have cost tens of thousands of jobs. While state government employment began increasing in July 2010, local government employment – which includes teachers, firefighters, and police officers – declined by 61,700 (3.6 percent) in 2010. Over half of this decline was due to job losses at public schools. In fact, local government job losses were larger than those of any other major sector in 2010. Without these losses, California would have gained nearly twice as many jobs last year.

An “all-cuts” solution to the budget gap would threaten the economic recovery in the short-term and compromise the state’s competitiveness in the long-term. Deeper cuts would inevitably lead to additional public sector losses at a critical time when the labor market is slowly improving.  These job losses would threaten California’s tenuous recovery.  California is at a crossroads; a balanced approach that couples recently enacted spending cuts with additional revenues is the only way to preserve the public structures essential to California’s prosperity.

—Luke Reidenbach