A month into the pandemic, it was obvious that the lockdown rules were going to have ill economic effects. The questions were: How deep would the problems run and how long would they last?
We still don’t know the answers in California, because the economy isn’t as healthy as it might appear.
Yes, the state GDP has expanded. Federal data show it grew 8.1% from the first quarter to the second quarter this year. But one key economic indicator is lagging.
In February 2020, the month before the lockdowns arrived, the unemployment rate in California was 3.9%, the second straight month of a record low. By October 2020, the state’s jobless rate was 9.3%, about one-fourth higher than the national rate of 6.9%.
It was 7.5% this August, an improvement, but still off the national rate of 5.2%. Only Nevada, at 7.7%, had a higher rate. Data for September show it’s stuck at 7.5% while the U.S rate fell to 4.8%. The lack of improvement from August to September fails to inspire optimism.
For the week ending Sept. 25, California workers filed almost 10,000 new unemployment claims, more than any other state. A week later, new claims fell by more than 14,000. It was a small piece of good news but not enough to make up for the week ending Sept. 18, when 75,800 Californians made their first unemployment claims — which happened to be an increase of 24,200 over the previous week.
During the week ending Oct. 9, 67,202 workers filed new jobless claims in the state, an increase of more than 3,200 from the Oct. 2 filings.
The latest data from the Bureau of Labor Statistics shows that half of the 22 metropolitan areas with the highest jobless rates in the country are in California. Eighth from the bottom – which is California’s El Centro at 19.4% — is the Los Angeles-Long Beach-Anaheim metropolitan area statistical area, with an unemployment rate of 8.8%
Can the post-pandemic recovery that had been predicted be complete with unemployment numbers that aren’t near the national average?
The San Jose Mercury News reported last month that California’s jobs recovery rebound is among the country’s worst, “mired near the bottom of the nation in recovering from mammoth job losses unleashed by coronavirus-linked business shutdowns, underscoring the feeble economic rebound for the state.”
By the end of July, the state had recovered only a little “more than 58% of the 2.71 million jobs it lost during March and April of 2020,” meaning California was 1.13 million jobs in the hole. An “analysis of official federal statistics” compiled by the Bay Area News Group ranked the state “in the bottom 10 of the 50 states” in job recovery.
Workers in Florida and Texas, states California is often compared to, both in terms of their economies and pandemic protocols, have fared much better. Unemployment in Florida fell from 7.9% in August 2020, when it was 12.3% in California, to 5% in August 2021. In Texas, the jobless dropped a single percentage point to 5.9% from August 2020 to August 2021.
UCLA economist and Hoover Institution senior fellow Lee Ohanian says there can be no full recovery with the jobless rate remaining high. He attributes California’s poor unemployment numbers to the state’s “more severe lockdown,” which disproportionately harmed the restaurant and food service industries.
And they “really haven’t come back,” he said, leaving many who worked in these industries outside of the state’s economic recovery.
A fact that will never show up in any politicians’ speech or news release that brags about how strict state and local pandemic policies produced a more-favorable outcome than virus guidelines in other states, but is nevertheless true, is the reality that a loss of jobs in itself can be as deadly as a virus.
According to a National Bureau of Economic Research paper, “the typical unemployment shock results in a significant decline in life expectancy and increase in mortality rates for the overall population.” The “COVID-19-related unemployment shock,” however, is not at all ordinary. Researchers believe it will be two to five “times larger than the typical unemployment shock,” and will result in more than 800,000 “additional deaths over the next 15 years.”
More than a year-and-a-half after the first lockdowns, many businesses are still struggling to keep their doors open just as hundreds of thousands of workers remain jobless. Nothing can be done about the past, but it would be helpful if officials remembered this experience the next time they’re tempted to throw a net over the economy.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.