California's Economic Recovery is Uncertain
At the UCLA Anderson Forecast June 2020 Economic Outlook, a virtual event hosted earlier this week, Jerry Nickelsburg, director at the UCLA Anderson Forecast, called California a "state of uncertainty". Currently, California's job loss numbers are on par with US numbers, but the state’s loss of travel, hospitality, and retail traction will have an impact on job loss and economic recovery, according to Nickelsburg.
To put the job loss into perspective, Nickelsburg compared unemployment numbers from the previous three recessions to the one The US is facing today:
1990: 500,000 jobs lost, 4% of total jobs over a 35-month period
2001: 300,000 jobs lost, 2% of total jobs over a 12-month period
2008: 1.3 million jobs lost, 8% of total jobs over a 26-month period
2020: 2.7 million jobs lost, 15% of total jobs over a 2-month period
In Calfornia, most of the job losses have come from the leisure & hospitality sector, as well as the retail sector. According to Nickelsburg, these two sectors have accounted for 50% of total job loss during the pandemic. “Our expectation is that for both retail and leisure and hospitality, we are going to be about 20% below the peak. So, these sectors are going to lag,” he said. “They are also low-income sectors. So, the folks that are going to be unemployed are also going to be the people that have the least resources to make it through this recession.”
In addition to job loss, the State of California is also running on a deficit of $54 billion. However, this debt is not as severe as the appearance of said number would suggest. “California has more than $20 billion in rainy day funds that it can draw on in addition to borrowing capabilities,” said Nickelsburg. “So, relative to many other states, California is not in as bad of shape and certainly not in as bad of shape as the $54 billion would suggest.” The Governor and legislature have already agreed to 8% in budget cuts, rather than the 34% initially suggested to manage the growing deficit.