The economy of California was once one of the nation’s, and arguably the world’s, greatest.
With a booming tech industry and leading in agriculture, California ranks among the top worldwide players in economic success.
If the state was its own nation, its economy would rank 5th in the world right behind Germany. According to the Bureau of Economic Activity, California’s economy is the largest in the United States with a 2019 gross state product of $3.2 trillion, or 14 percent of the total U.S. economy.
“By any standard measure, by nearly every recognizable metric, the state of California is not just thriving but, in many instances, leading the country, inventing the future, and inspiring the nation,” Gov. Gavin Newsom stated in February’s state of the state address.
Three weeks later Gov. Newsom declared California in a state of emergency regarding the spread of the Coronavirus. With exceptions being essential businesses such as grocery stores and health services, California’s fruitful economy almost completely shut down.
The effects of the state’s economic shutdown were seen instantly as millions of Californians lost their jobs. According to the Employment Development Department (EDD) of California, though the pace of unemployment is steadily slowing since the initial state of emergency declaration in March, a total of 3.4 million Californians have lost their job directly due to the effects of COVID-19. That’s one in every six workers in the state.
Compared to numbers in March 2019, California’s unemployment claims rose over 876 percent this past March. With the state’s most recent release of numbers, claims for August 2020 were up 476 percent from August 2019.
In August, the state’s unemployment rate lowered to 11.4 percent from July’s 13.5 percent. California EDD says the leisure and hospitality industry received the greatest hit for job loss with almost 85 percent of the sector’s overall job loss occurring since March.
As of October 20, California is considered to have substantial new positive covid tests; characterized by 4-7 new cases per 100 thousand people daily. This “substantial” rating means that limited non-essential businesses are open with modifications in how they run.
High-tech businesses, concentrated predominantly in Silicon Valley with a few scattered throughout the rest of California, have managed to ease surviving the pandemic for some. More often than not, they allow for remote working which coincides with Gov. Newsom’s shelter-in-place order and promotes physical distancing.
In an interview with ABC 10 San Diego, University of San Diego economics professor Alan Gin, says that his primary concern is for the growing wealth inequality in the U.S.
“It was already bad in this country, but now it’s likely to be even worse as a result of this,” Gin told ABC.
The growing wealth gap is further perpetuated by the ability of higher salary jobs to mobilize their workforce while lower income positions were forced to shut down operations.
The current direction of the economy has caused an influx in California’s inlands. People are moving away from coastal cities and into previously less desired suburban areas, according to business columnist Jonathan Lansner.
Lansner speculates that California residents are taking advantage of work-from-home policies by relocating to more affordable communities than metropolitan areas have to offer.
This economic recession is a bit different from the last one spanning 2008-2009. The last recession virtually ruined the housing market. Today, record-low federal interest rates are attracting new buyers.
In addition to local economic threats, the lack of tourism is leading to an unfavorable economic trend in the state. California will lose $72.1 billion in travel-related spending, this year alone. According to Tourism Economics, a Oxford company that evaluates economic trends, 2020 is California’s worst tourism year while 2019 was its best on record.