Economic Context of the 2015-16 Budget: A Recovery That Is Leaving Many Californians Behind

January 7, 2015

California’s state budget is a primary funding source for many public services and systems that support working families and help them climb the economic ladder. Unfortunately, many of these areas of public investment remain underfunded and undersupported today. One example is California’s subsidized child care system, which helps parents work more hours by giving them affordable child care options. Funding for child care and preschool programs remains nearly one-third below the pre-recession level.  Other areas, such as assistance for low-income seniors and people with disabilities (SSI/SSP) and the state’s system of public higher education, also are undersupported even as the state’s revenues surpass where they were before the budget shortfalls caused by the Great Recession.

Providing support for economic security and opportunity is especially important given that so many in California are still struggling in the current recovery. While California’s economy has improved markedly since the worst years of the Great Recession, many regions are still coping with high rates of poverty and joblessness. For these parts of the state, it still feels like California is in a recession.

The latest county-level Census figures on poverty drive home this point. These figures combine poverty estimates from the American Community Survey with other administrative data to generate estimates of poverty for smaller geographic areas. (This process results in statewide poverty rates that differ from those published last fall.) The new data show that 16.8 percent of all Californians, and 23.5 percent of all California children, lived in poverty in 2013. In other words, nearly one in four California children lived in households with incomes below the federal poverty line ($23,624 for a family of four with two children in 2013). Within California there are large disparities among regions (see table). While counties in the San Francisco Bay Area all had poverty rates that were lower than the state average, counties in the San Joaquin Valley all had above-average rates of poverty and child poverty. Fresno County had the highest rates of poverty in 2013, with 28.6 percent of all people living in poverty and 42.0 percent of all children living in poverty.

[Click table to view at full size]

Unemployment also remains worryingly high in regions throughout California. In the third quarter of 2014 (the last full quarter for which data are available), 11 counties had unemployment rates in the double digits, and more than half of these counties were in the San Joaquin Valley. The county with the highest unemployment rate was Imperial County in the southern part of the state, where more than one in four workers (26.9 percent) were unemployed.

Poverty and unemployment are just two measures of an economy’s health, yet other measures of economic well-being — such as income or food insecurity — also show that California’s recovery is not leading to economic gains for many families. Again, such measures show a large regional disparity and a California that is deeply segmented not just along income levels, but by geographic area as well.

When Governor Brown releases his proposed 2015-16 budget this week, there is likely to be a large focus on an “either/or” choice between responsible budgeting and committing more state dollars to underfunded programs. This is a false choice given the economic realities faced by many Californians today. The 2015-16 budget that is eventually enacted must start to address on-the-ground economic conditions in much of California. This means that the state budget must take on issues of poverty and joblessness and help boost an economy that is leaving many Californians behind.

— Luke Reidenbach

Bringing Down the Unemployment Rate Depends on Getting the Long-Term Unemployed Back to Work

October 9, 2013

A few weeks ago, the Washington Post’s Wonkblog published an interesting chart that broke down the nation’s unemployment rate by workers’ duration of unemployment. The key takeaway is that in order to bring down the nation’s jobless rate in any substantial way, we need to get the long-term unemployed — those individuals out of work for at least six months — back to work. These workers, who face unique obstacles to finding jobs, represent a significant share of the nation’s unemployed.

Applying a similar analysis to unemployment in California tells a comparable story: California’s unemployment rate remains high — at 8.9 percent — in large part because long-term unemployment remains high. As of August, slightly more than 40 percent of the state’s unemployed workers had been out of work for at least six months. If these workers all found jobs tomorrow, California’s jobless rate would be below 6 percent. Consistent with the national trend, the number of long-term unemployed Californians is getting smaller, but it is not clear that this is because they are finding work. Some of this drop may due to individuals giving up their job searches altogether — meaning they are not considered part of California’s labor force and thus not counted as unemployed. A recent national analysis by the Oregon Office of Economic Analysis found that the long-term unemployed are around twice as likely to drop out of the labor force as to find a job.

Even though long-term unemployment has started to decline, it remains close to historic highs. Today in California, the share of workers who have been out of work for at least six months is far higher than at any point during the recessions of the early 1990s and 2001. Also, while California’s overall unemployment rate is down from recent highs, it is still higher than at any point during the 2001 recession.

There is clearly the need for a sustained policy response focused on helping these individuals find work and giving them the support they need amidst a difficult economy. Unemployment can create a stigma that makes employers reluctant to hire those who have been out of work, and the long-term unemployed lose crucial skills while facing the significant financial challenges that accompany long durations of joblessness. Unfortunately, as our executive director Chris Hoene blogged about last week, federal policymakers, by not funding the federal government, are jeopardizing the economic recovery and disrupting key services. If the federal shutdown continues, California’s Employment Development Department warns this could mean a delay in unemployment benefits and reduction of vital services such as job training for unemployed Californians — exactly the kinds of services and support the long-term unemployed need today.

— Luke Reidenbach

Why a Typical Economic Recovery Is Bad News for California Workers

July 22, 2013

According to last Friday’s employment report, California added 30,200 new jobs in June, and the unemployment rate declined to 8.5 percent. These latest jobs numbers further confirm that California’s job market is improving faster than analysts had predicted. Economic projections as recent as this past May estimated that on average the unemployment rate would remain above 9% throughout this year. So in terms of the basic trend, this is good news. But if we look more broadly at the numbers, the picture is less rosy: California’s current recovery is very similar to the jobs recoveries that followed the 1990 and 2001 recessions. Since the Great Recession was a one-of-a-kind event — and the deepest economic downturn in generations — any indication of a “typical” recovery is bad news for California’s workers.

Since California’s jobs recovery began in February 2010, 803,000 new jobs have been created. During an equivalent period of 40 months following the 1990 recession, 755,000 jobs had been added. After the 2001 recession, the state had added 750,000 jobs by this point in its jobs recovery.  As the chart shows, recent employment growth closely tracks these two prior post-recession periods of job growth.

But this chart also shows just how severe the Great Recession was for California, especially compared to the 1990 and 2001 recessions. Even with the labor market outperforming expectations, California will not reach pre-recession employment levels anytime soon. As of June, there were still 529,000 fewer jobs than there were on the eve of the recession. Assuming that the average monthly job growth over the past year continues, California will not reach its pre-recession jobs level until July 2015 — two years from now. Moreover, this measure actually underestimates the length of time it will take to return to the pre-recession jobs peak, because it does not include the additional jobs needed to account for the natural growth of the working-age population.

So, despite this past Friday’s somewhat upbeat report, the 1.6 million Californians who are still unemployed will face a continually weak job market for some time to come.  They will need renewed support from state and federal lawmakers as the state continues to pull itself out of the massive jobs hole left by Great Recession.

— Luke Reidenbach

Public Sector Job Losses Continue To Hinder Recovery

September 4, 2012

Earlier today, we released our Labor Day report for 2012, the CBP’s annual look at the California job market and how the state’s workers and their families are faring. Overall, the latest available data are troubling. More than three years since the Great Recession ended, California still confronts a huge jobs shortfall, having gained back less than two-fifths of the nearly 1.4 million jobs it lost during the downturn. What’s more, the purchasing power of the typical California worker’s hourly wage has hit its lowest level in almost 15 years, and long-term joblessness is down only modestly from a record high. Read the full report here.

One of the key take-aways from this Labor Day report is that deep cuts in state and local government budgets continue to weigh on the state’s economy. Although recent private sector job gains in California have been much stronger – in percentage terms – than those in the nation as a whole, public sector job losses continue to offset a portion of these gains.

As the chart above shows, California lost more than 31,000 state and local government jobs between June 2011 and June 2012. This accounts for one job lost for every 10 private sector jobs gained during this period. More than three-quarters of these lost jobs were in K-12 public schools and community colleges.

Several years of deep budget cuts to core public systems, including K-12 education and higher education, are hampering the state’s ability to rebound quickly from the Great Recession as well as threatening to limit our ability to prepare the state’s workforce to compete in the global economy. New revenues to help prevent deeper cuts and allow us to begin reinvesting in education and other public systems that contribute to a strong economy are more important than ever.

– Steven Bliss

Far Too Soon To Pull the Plug on Emergency UI

December 16, 2011

Today’s employment report shows that California’s job market is slowly on the mend, but jobs remain scarce and forecasters anticipate that subpar job growth will keep the state’s unemployment rate at recession-like levels well into the second half of the decade. California gained a modest 6,600 jobs in November, and the state’s unemployment rate dropped by 0.4 percentage points to 11.3 percent – the third monthly decline in a row. Yet more than 2 million Californians remain out of work, including approximately 700,000 who report having searched for employment for at least a year. The odds of finding work are stacked against these long-term unemployed. Currently, US businesses only have enough job openings to employ one-quarter of the nation’s unemployed.

What’s worse is that many of the unemployed could be facing even longer periods without work. The Legislative Analyst’s Office (LAO) recently projected that job growth could be so weak over the next few years that the state’s unemployment rate could remain above 10 percent through 2014. That means that even three years from now, California’s jobless rate could be higher than it was during any past recession in recent history, including during the deep downturns of the early 1980s and early 1990s. The LAO also projects that by 2017, the state’s unemployment rate may only fall to 8.5 percent – well above what’s considered typical of a healthy job market.

With millions still out of work and robust job growth possibly many years off, now is not the time for Congress to slash federally funded Unemployment Insurance (UI) benefits for the long-term unemployed. Yet the House of Representatives passed a bill this week that would substantially reduce the number of weeks that UI benefits are available to workers who exhaust their regular state benefits, as well as make permanent changes to UI that would make it more difficult for workers who lose their jobs through no fault of their own to qualify for benefits. The US Department of Labor estimates that if the House bill is enacted, 3.3 million of the nation’s unemployed – including 584,000 Californians – would lose access to UI benefits in 2012. If Congress takes no action at all and allows emergency UI programs to expire at the end of the year, a total of 5.0 million Americans, including 715,000 Californians, would lose their benefits.

Prematurely cutting off emergency UI benefits makes little sense. Congress has never before pulled the plug on emergency UI when the nation’s unemployment rate is as high as it currently is. Doing so now would not only increase hardship for many families, but also pull substantial purchasing power out of the economy, costing additional jobs and setting the recovery back even further.

— Alissa Anderson