California’s top industries are shrinking in a sluggish economy

from Dan WaltersCalMatters

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As Gov. Gavin Newsom ramps up what looks like a 2028 White House bid, the mainstay of his pitch during television interviews and social media appearances has been California’s economy.

As Newsom says, the state’s annual economic output of more than $4 trillion is not only the fourth largest in the world for a nation, but it’s also a model of entrepreneurial energy and capital-boosting programs.

If only it were true.

A year ago, the Legislature’s budget analyst, Gabe Petek, indirectly booed Newsom’s boast.

“California’s economy has been in a prolonged slowdown for the better part of two years, characterized by a soft labor market and weak consumer spending,” Petek wrote, while outlining the state’s deficit-related budget dilemma.

“Although this slowdown is gradual and the severity is lighter than a recession, a look at the latest economic data paints a picture of a sluggish economy. Outside of government and health care, the state has not added jobs in a year and a half.”

Nothing has changed since then. Employment has remained at roughly the same level for several years. California’s unemployment rate is 5.5%. the highest of any statewith more than a million workers out of work.

Meanwhile, the state overspends its revenues, creating what budget experts call a “structural deficit,” meaning that the spending programs locked into law are greater than the reliable income to fund them.

California really can’t afford these compassionate services that Newsom brags about creating. He and the Legislature, amid much fanfare, expanded state-paid medical care for undocumented immigrants, only to be forced to take it back after costs turned out to be twice as high as expected.

It should be noted that what Petek saw a year ago and remains fundamentally true today predates Donald Trump becoming president, so his accusation that Newsom tried earlier this year, is baseless.

One of the most troubling aspects of California’s spinning economy is the turmoil in two venerable sectors, the San Francisco Bay Area’s high tech and Southern California’s film and television production industries.

Silicon Valley has been shedding jobs over the past few years as it shifts its focus to artificial intelligence. This week’s announcement that Amazon is cutting 14,000 jobs — and could eventually double that number as it focuses on AI — was a shake-up.

Not all of these layoffs are in California, of course, but the online retailer has been heavily involved in California, operating multiple warehouses.

“We expect to continue to hire in key strategic areas while finding additional locations where we can shed layers, increase ownership and realize efficiency gains,” said Beth Galetti, Amazon’s senior vice president of people, in a note to employees.

Meanwhile, production conglomerate Paramount, a mainstay of the Southern California entertainment industry for decades, also announced pay cuts as new owners took over.

Paramount on Wednesday started lays off about 1,000 employeesthe initial cohort of what may be much deeper. David Ellison, Paramount’s new boss, said the cut was aimed at “building a strong foundation for the future”.

The layoffs affect not only Paramount’s film production, but also staff at the CBS television affiliate, MTV and Comedy Central. The Los Angeles Times reported that another 1,000 jobs are expected to be cut later, bringing the total reduction to about 10 percent of Paramount’s workforce.

Film and television production in Southern California has been declining for years as companies cope with high costs and are drawn to other states or nations with lower costs and subsidies. Another iconic film company, Warner Bros. Discovery, currently for sale.

Despite California’s budget woes, Newsom and the Legislature increased state tax credits — effectively cash grants — for television and film productions in the state to $750 million this year. But the bleeding continues.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.