California is not creating jobs fast enough to support tax increases for pensions

On a superficial level, things look pretty good in California. Sure, we have big problems with wildfires and other periodic disasters, but the state’s finances have made a strong recovery since the depths of the recession. Indeed, Gov. Brown has repeatedly touted the multi-billion-dollar surplus and the state’s balanced budget.

But objective assessments from government experts and academicians have warned of troubling aspects of the state’s financial condition. These include mega projects we can’t pay for, business flight out of California, unfunded pension obligations in the hundreds of billions of dollars, a state government that is growing much faster than population and inflation combined and a dysfunctional political system.

Close analysis reveals that California is like a home with a fresh coat of paint but a crumbling foundation. It may look pretty, but there are serious problems that are not readily apparent.

One area where there is a gulf between superficial appearance and reality is in California labor statistics. Here again, on the surface, the state’s 4.2 percent unemployment rate looks very good — and it is. During the depths of the recession, the state hit a high of 12.2 percent unemployment and tens of thousands of Californians were suffering. There’s no denying that we’ve seen a vast improvement.

But there are metrics beyond the simple unemployment rate that must be taken into consideration to fully comprehend the health of California’s labor force. A recent report from the California Center for Jobs and the Economy has troubling news: “California’s labor force grew only 16,922 over the 12 months ending July 2018, or 0.1 percent growth. The U.S. as a whole grew 1.8 million — a 1.1 percent expansion.” In other words, California’s labor force has seemingly hit a plateau — an unusual occurrence given the strength of the national economy.

When it was coming out of the recession, California was a job-creation machine. Indeed, for many quarters it was producing more jobs than economic powerhouses like Texas. But some context is necessary here. Because California was harder hit in the recession, we basically had nowhere to go but up. That gave the appearance that California was outperforming other states in job growth when, in truth, we had more ground to make up.

Some other figures from the California Center are equally disturbing, such as the fact that we are not creating jobs as fast as we were when coming out of the recession: “Between July 2017 and July 2018, Bureau of Labor Statistics (BLS) data shows the total number of employed in California increased by 120,600 (seasonally adjusted), or 4.9 percent of the total net employment gains in this period for the U.S. Based on the total numbers, California dropped to 5th place behind Texas (which has a civilian working-age population only 69 percent as large as California’s), Florida (55 percent as large), Massachusetts, and Georgia. Measured by percentage change in employment over the year, California dropped to 36th highest. Adjusted for working-age population, California dropped to 36th as well.”

Moreover, there is significant concern over the types of jobs being created: “Nearly half (48 percent) of net jobs growth since the recession has been in the lower-wage industries. For the 12 months ending July 2018, lower-wage industries accounted for over a quarter (28 percent) of new jobs, while middle-class blue-collar jobs produced over a quarter (30 percent) as construction levels remained higher compared to prior years.”

Diving into employment numbers isn’t that exciting for the average voter, but this is important because California will need a growing –— not stagnant — workforce that will share the burden of paying down the state’s prodigious level of debt — particularly all the pension obligations our politicians have committed us to. As explained by the California Center’s report, “While workers elsewhere continue to return to the workforce, California’s continued low rate has implications for future growth in the state, including the ability to sustain jobs expansion as fewer workers are available and continued effects on state and local budgets for higher social program spending compared to other states.”

Translated, this simply means we need more people working in well-paying jobs if California hopes to avoid insolvency.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.