We learned on Friday that California may be on the verge of jobs growth. 32,000 jobs were created in the state in January 2010, including in construction and manufacturing. However, the unemployment rate also went up to 12.5%, as more people sought work. It's a sign that any economic recovery that might be under way is anemic at best, and that we still have a VERY long way to go to solve the problems of what may be persistent unemployment.

Unfortunately, this economic recovery is not only anemic, it may be transitory. And even if it were to continue to pick up steam and last for a while, it will not be a true "recovery" in the sense of creating broadly shared prosperity. Instead we appear to have experienced another dramatic ratcheting downward of economic opportunity for most Californians, while creating conditions that both ensure we will have another nasty crash and that many more people will suffer when it happens.

This phenomenon is not unfamiliar to California. Since 1980 we have experienced four recessions that have frayed the safety net, fueled anti-government sentiments, and created more inequality and economic vulnerability, all of which mean that the subsequent recession hits harder than the one that came before it. The recoveries from each recession have been largely driven by unsustainable asset bubbles that benefit the wealthy but create little if any actual wage growth for everyone else.

All indications are that we will experience the same here in 2010 - that is, if this halting recovery even lasts. Below are some thoughts on the ongoing economic problems California faces and what needs to be done to actually solve them, instead of ignore them in the face of another asset bubble.

• *Any current economic recovery is driven by massive federal economic stimulus, and will collapse if and when it is withdrawn.* Since California has done absolutely nothing to stimulate economic recovery, any job creation currently being experienced is due solely to the Obama Administration's 2009 stimulus plan. Unfortunately, that doesn't seem likely to be renewed, as both the White House and Senate Democrats are putting deficit reduction ahead of recovery. They're afraid of teabaggers whining about deficits, so instead they're going to repeat the error of 1937 and drive the state and nation deeper into recession by taking away government support. We need a second stimulus that is larger than the first if recovery is to happen, and it must be aimed at creating jobs, not at pointless tax cuts.

• *Austerity budgets and policies designed to protect creditors leave debtors less able to participate in and fuel economic growth.* Last week's student protests were very similar to recent protests in Spain and Greece in that they shared a common enemy: austerity budget cuts made in the name of appeasing creditors. Just as economic commentator Simon Johnson believes Europe risks global depression with these austerity policies, so too does California risk another downward slide with its ongoing slashing of government spending and programs. As average Californians are being told to spend more money for health care, education, and transportation so that government doesn't have to tax the rich and the large corporations to pay those costs, that makes it more difficult for those Californians to clear away their household debts, rebuild savings, and power the recovery through sensible spending choices.

• *Policies that favor large corporations at the expense of small business leave the state more vulnerable to recession and fail to create good jobs.* Small businesses in California need things like universal health care, affordable transportation, worker-friendly labor laws, and above all, a well-paid customer base that is able to sustain locally owned business. Instead California's current policies all favor large businesses, who get the tax breaks and bailouts and are able to block reforms that could make it easier for people to start and maintain businesses. Small businesses drive a greater share of job creation, are far less likely to outsource or offshore work, and tend to keep profits in the community. They need to be emphasized, not screwed over by policies designed to keep costs low for the big businesses, who can then crowd out their smaller competitors.

• *The state budget is still in permanent, long-term deficit, and austerity appears to be the solution for years to come.* Just as more government spending is needed to sustain any nascent recovery that might be under way, more spending is also needed to sustain a fairer, more prosperous economy. If people can't afford an education, can't afford health care, can't afford to get around the region for work, then they will be vulnerable to the next downturn, which will come much sooner than expected. California is projected to still have budget deficits for the next 3 years, of about $20 billion per year. If we cut another $60 billion in spending, California's economy will be left in tatters, since the programs that help keep down the cost of living for Californians will no longer be there. Now is the time to raise taxes by a large amount on the wealthy and on large corporations, to close the deficit and make it possible to restore and grow government services to strengthen and lengthen any economic recovery.

I'm sure there is more that can be examined and that must be done, but these are some general principles to keep in mind. If there is any economic recovery over the next 12-18 months, however weak and uneven it is, Sacramento will be tempted to avoid tackling the deep problems and implementing the solutions we need to a 30-year long downward spiral.

That wouldn't be good. Because if the status quo remains in place, most Californians will not see lasting benefits from this recovery. Sure, they might be able to find a job, but it won't be enough to pay the bills, eliminate the debt, build up savings, and help build a more sustainable economy for the future.

Hello everyone.

Since you're on this site, I'm sure it will come as no surprise that California is in trouble.
California, the richest state in the Union, also has the worst credit rating, has asked for a bailout from an equally crippled federal economy, and now sits on a 12.2%
unemployment rate, as I write this. Who knows, as you read this, it may be more.
I'm not hear to be the voice of doom, but rather yet another voice of action. Our country has been dragging us down an economical death spiral since Milton Friedman and the Chicago School. Corporations have been ravaging economies, leaving in their wake thousands of jobless, homeless and hopeless citizens. Aren't we supposed to be a government of the people, for the people and by the people? If you see what I see and notice as I do, the state of our state, you can tell, that's not been the case.
I'm here to act, with you all, concerned people that want to change things. Unfortunately, not all people see the need or desire to work for a healthy government and economy. Let's change this state from a crippled shadow of what it once was to a new, modern splendor that can once again be looked at with pride by its inhabitants.

You wouldn't know it by paying attention to the goings-on in Sacramento these days, but California is mired in one of the worst economic crises we've experienced in several decades. Over the Labor Day weekend our friends at the California Budget Project charted the depths of that crisis in a new study, "In The Midst of the Great Recession: The State of Working California, 2009."

The CBP's study has already been getting media coverage for its stat that 2 of 5 working-age Californians are jobless. But the report gives a fuller picture of just how bad things are out there. Among the conclusions:

• California has about the same number of jobs in July 2009 that it did in January 2000 - in other words, the recession has wiped out a decade's worth of job growth. Add in the fact that we have 3.3 million more people of working age and you can see how severe the recession is.



• Job losses have been more severe - in both overall number and the rapid rate of decline - than in any previous recession (at least those with available data).



• Wages are declining across the board, but the top wage earners have seen increases, and the top 1% is taking a share of the overall wealth at a rate unseen since the Roaring '20s, which as we know ended so well.



• More and more people are beginning to exhaust their unemployment benefits, a situation likely to worsen as high unemployment lingers for several more years.

There are several important conclusions I take from this study. You're unlikely to ever see these in what's left of the major media in this state, and even Democrats in Sacramento don't seem to be touting these stats or conclusions as evidence of a need for change.

1. Arnold Schwarzenegger is a job killer. He and his allies at the Chamber of Commerce like to tout their opposition to so-called "job killer" bills that usually increase taxes or regulations on businesses. And yet after 6 years of these policies California is far worse off than we were at the depth of recession that ultimately cost Gray Davis his job. If Democrats ever wanted evidence that anti-tax, anti-regulation policies are an economic disaster, California in 2009 is it.



2. Sacramento has nothing - nothing whatsoever - to offer the jobless or to this state's future. As I often remark, the only words forbidden to be spoken within the halls of the state Capitol are "economic recovery." Both Republicans and Democrats have agreed that their #1 task isn't economic recovery but to eviscerate government when it is most desperately needed; they merely disagree on the particulars. Economic recovery should take precedence over nutty demands to cut spending, but in Sacramento, it's been the other way around.



3. Specifically, we have yet to see *any* plans from either party in the state legislature for producing meaningful, lasting economic recovery. California voters took matters into their own hands last November by voting for Proposition 1A, to create 160,000 short-term jobs and 450,000 long-term jobs by building a high speed rail system. But HSR, to name but one example of possible government job creation programs, has very few defenders in the Legislature, and plenty of opponents (including Democrats like Sen. Alan Lowenthal).



4. Lacking any plan for economic recovery or job creation, the factors identified in the CBP report are going to get much worse. Wages will continue to drop for everyone who isn't already wealthy, as persistent unemployment perpetuates a weak economy and fuels a deflationary cycle.

So what do we do about this?   Read More »

The geography of Depression is spreading. Yesterday we looked at how Mendota and other Central Valley towns are facing Steinbeckian scenes of poverty. Today brings another account of dire economic straits - this time in the San Bernardino/Riverside region of Southern California long known as the "Inland Empire".

Tom Woodruff, director of Change to Win's Strategic Organizing Center, offered this overview of the Depression in the Inland Empire, where unemployment is above 12%, and how the Employee Free Choice Act can help improve dire conditions:

The area's fractured employment model has turned a recession into a depression. There are now tens of thousands of laid off warehouse workers with no unemployment, no safety net at all, just barely getting by.

Ignacio Sanchez lost his warehouse job in October and now struggles every day to feed his family. Ignacio was a "lumper," unloading the large containers that come to the warehouses from the ports. He now spends his days watching over his five year-old daughter and searching dumpsters for cans and food. When he finds food, he has to hide where he got it from his daughter because if she knew, she might not eat it.

Olga Romero, who worked 14 hour days repacking shoes at a warehouse, was laid off three months ago with no warning or cause and has been unable to find work since. She can only afford to feed her family rice and beans for dinner, and worries about the days ahead. "There's no future with these bad jobs," she says. "I need a real job to take care of my family, not another temp job."

As conditions worsen in the Inland Empire, the big retail companies that created the broken business model have not accepted responsibility for the damage they have done. They hide behind the temp agencies and third-party logistics firms in an elaborate shell game.

The Inland Empire became a warehousing and shipment center for the nation - handling the products shipped from China to LA/Long Beach and putting them on trucks and trains to the nation's big box stores. The basic economic model was unsustainable; the employment itself was temporary and lacking in most basic benefits. And it goes without saying that most of these jobs were non-union.

Just as pro-labor legislation like Section 7(a) of the 1934 National Labor Relations Act and the Wagner Act of 1935 helped pull the nation out of Depression and ensure that the recovery would build a strong and lasting middle class, the Employee Free Choice Act can play a similar role in places like the Inland Empire:

More than one million new jobs will be created in the goods movement industry in Southern California by 2030, according to projections. For only pennies on the dollar, the retail industry could turn them into high quality, middle class jobs that support a family. These are jobs that cannot be outsourced and could play a major role in revitalizing our reeling economy. But only if the nation's biggest retailers are held responsible for the treatment of all the workers in their supply chain.

I have to confess that I am not sure the goods movement industry's future growth in SoCal will be so vast, and I am skeptical that relying on imports from China at the expense of domestic manufacturing (the Inland Empire used to be a major center of blue-collar work in the US, including the Kaiser Steel mill in Fontana) is a smart move. But in any case, we need to ensure that California's workers have the opportunity to organize unions for economic recovery.

Because we are learning the same lessons today that we learned 75 years ago - that we will not have economic security and shared prosperity unless the people of this nation have the power to wrest wealth back from the oligarchs.

Dan Walters examines the obvious in today's Sac Bee, pointing out that the economic forecasts for California are becoming dire:

Consider, for example, this dark, but perhaps realistic, projection by University of California, Santa Barbara, economists:

"The … economy will likely continue to decline for another two years, perhaps longer. We expect the number of California jobs … economic output … retail sales (and) tourism revenues will fall throughout the forecast horizon. There is no measure of economic strength that provides even a glimmer of hope for California's economy in the near term, none."

The UC Santa Barbara forecast has California's unemployment rate, now over 10 percent, nearing 14 percent by next year, which means another half-million workers would join the jobless ranks.

The UCSB forecast (for which I'm unable to find a link, unfortunately) jibes with what leading economic observers like Nouriel Roubini are saying - that we will see a recession into 2010 and then a slow recovery from there.

All of that begs the question, of course, of exactly what's supposed to drive that recovery. If we look back at the last three recoveries, we can see a pattern of dependence on one or two sectors of the economy to produce a boom, but little long-term planning beyond that:

1980s recovery: Driven mostly by defense spending (especially in Southern California, a major beneficiary of the Reagan arms race boom) and, later in the decade, by a housing bubble. High tech began to make its presence felt later in the decade in the Silicon Valley. All of this masked the effect of the beginning of neglect of basic government services, including schools, which began in the immediate aftermath of Prop 13's passage in 1978.

Core weaknesses: Defense spending and housing boom were both unsustainable. When Cold War ended in 1989, which was perhaps coincidentally the peak of the '80s housing boom, CA's economy had no real safety net to avoid a recession. Much of this was fueled by debt, but at far smaller levels that what we have seen recently. Economy began shifting away from manufacturing.

1990s recovery: The 1980s boom turned into a particularly nasty bust by 1991-92, with unemployment in Southern California pushing 10%. This recovery was led primarily by the high tech sector, which spread throughout the Bay Area and into Southern California (former defense industry workers turned out to be very good at high tech). Tax increases at the outset of the decade helped support this growth by arresting the decline of the UC and CSU system into unaffordability and loss of quality, sending a steady stream of qualified workers into the high tech field. Additionally, CA became a center of the deregulated financial industry. Housing did not actually become a major part of this boom until much later in the cycle.

Core weaknesses: High tech work could be easily outsourced. The manufacturing decline that began in the '80s accelerated in the early '90s recession. Late '90s spike in tax revenues led politicians to recklessly cut taxes to unsustainably low levels, endangering the state's ability to recover from the next crisis. By decade's end housing was becoming a larger part of the economy, and much of this was based on sprawl dependent on debt and cheap oil.

2000s recovery: Based almost wholly on housing and deregulated financial products - and on a pile of debt. Soaring cost of UC/CSU led to exacerbation of a generation of inequality - high cost of higher ed combined with fewer high-wage job options limited upward mobility of millions. Government recovery was anemic at best. Health care costs began to spiral out of control, as did housing costs. Often known as a "jobless recovery".

Core weaknesses: Required endless supply of debt and cheap oil to sustain what little growth there was. When cheap oil vanished after 2005 entire economy was imperiled. Erosion of government and safety net meant that next recession would not only be nasty, brutish, and long but that government would not be in a strong position to lead recovery.

As you can see, the recoveries of the '80s and the '00s were fundamentally weak, whereas the '90s recovery had somewhat of a stronger base but was susceptible to underlying problems (free trade, anti-tax policies, loss of manufacturing base, increasing tendency toward dependence on sprawl and housing markets to produce consumer spending). And I haven't even mentioned the enormous environmental costs of these recoveries, which should further suggest the undesirability of repeating any of these models.

Ultimately the problem was that at no time in the last 30 years did California plan for the future. Each recovery just sort of happened, partly by federal design and partly due to state laws, from Prop 13 to land use, favoring sprawl. Each recovery was dependent on debt in one form or another, and each recovery failed to fix the long-term decline in government resources (although the '90s recovery began to address this before Pete Wilson and Tom McClintock got their hands on the till).

What this means is that California needs, desperately, to start thinking about how it can produce long-term sustainable growth and not just try and inflate a fourth bubble or a recovery whose bases are fundamentally weak. Over the flip I propose some elements of what this strategy might look like.   Read More »

What will you do with your IOU from Aarold? I would pay all the hardworking teachers and educators in California what they deserve. Frankly this budget crisis is a bunch of malarkey. How can we afford to spend so much of our money on our state prison system while ignoring education? California is at a crossroads: if we choose to ignore education, we are truly doomed. All the uneducated will ultimately end up in the prison system anyway. But maybe that's the answer. After all, prisons create jobs, right? Maybe we should just cut to the chase and spend all our invaluable Arnold Bucks on the prisons, completely ignoring education, and then hire all of the state's educators to run our prisons. Would that work? Oh, I almost forgot about the students (the future of California and this Great Nation), but that's okay, because apparently so did Arnold.

When Arnold took office in late 2003 he argued that one of the state's highest priorities was to "reform" a workers' compensation system that was supposedly driving businesses, and therefore jobs, out of the state. And the Legislature did so, cutting benefits to injured workers in order to try and keep business and the Chamber of Commerce happy.

Five years later California faces a similar crisis, as skilled workers flee the state in droves, taking their salaries and therefore their positive economic impact with them. But this time, Arnold seems happy to see their backs, because it's teachers and not well-connected corporations that are fleeing a state thanks to poor budget priorities:   Read More »