Economic Outlook: Uncertainty Looms

Is the recovery sputtering? Some economists are increasingly worried that it is. National economic growth slowed in the first quarter of the year, Unemployment Insurance claims recently trended back up, and two key indicators of future hiring – the number of temporary help jobs and workers’ average weekly hours – suggest that job growth may slow in coming months.

The Governor’s economic outlook, included as part of his May Revision budget proposal released on Monday, also expressed concerns about the strength of the recovery. The Administration warned that while “a modest recovery is still underway” in California, “uncertainty looms” and the weak housing market together with state and local budget cuts “remain the principal impediments to stronger job growth.”

Indeed, counties, cities, and public schools have laid off tens of thousands of workers during the recovery due to budget cuts, adding to the ranks of the unemployed. These ongoing layoffs are one reason why California’s recovery has not been shared equally among certain groups of workers. A new CBP analysis released today shows that:

  • Men have gained more than five jobs for every job gained by a woman nationwide since employment bottomed out last year. (California jobs data by gender are not available, but the trend is likely similar.) Women are lagging behind men, in part, because they are nearly three times as likely to work for public schools.
  • Job loss accelerated for college-educated Californians last year, coinciding with increased public sector job loss. These workers are nearly twice as likely as other Californians to work in the public sector as a whole and more than three times as likely to work in public schools in particular.

These facts make clear that a balanced approach, which includes additional revenues to avoid cutting spending even deeper than the billions in cuts already enacted, is the only reasonable approach to solving California’s budget problems. Deeper cuts would not only lead to additional job loss, threatening California’s fragile recovery, but also could compromise the state’s future competitiveness. In the words of Paul Krugman, “Unemployment isn’t just blighting the lives of millions, it’s undermining America’s future. The longer this goes on, the more workers will find it impossible ever to return to employment, the more young people will find their prospects destroyed because they can’t find a decent starting job.” In fact, a recent Economic Policy Institute study concluded that job prospects for the soon-to-be-graduating class of 2011 – our future workforce – are grim and that many in that class will join the millions of workers already sitting on the sidelines of the job market.

As policymakers work to close California’s remaining budget gap, we urge them to keep in mind that we are still in the midst of an unemployment crisis and that deeper cuts place our state’s future prosperity at stake.

—Alissa Anderson