The rosy picture of the CA economy overlooks its dark spots

from Dan WaltersCalMatters

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As Gavin Newsom makes his increasingly frequent out-of-state appearances — ostensibly gearing up for a 2028 presidential campaign — one of his messages is that California’s economy is on the rise.

“We dominate in every category,” Newsome boasted at the time recent presentation to the Center for American Progress, a left-leaning think tank. “We are the center of the universe (and) America’s future attraction.”

He cited the state’s economic output of over $4 trillion, which if it were a nation would rank 4th^th or 5^th the largest in the world and mentioned the number of Nobel Prize winners and vigorous venture capital investment in the state.

In addition, he boasted, California has used that economic power to fund a range of social programs and services, such as universal health care, proving, he said, that such largesse can coexist with capitalist profits.

Subconsciously, Newsom was pushing the idea that his election as president could bring California-like prosperity and generosity to the nation as a whole. However, since Newsom uses the economy as his main talking point, it would be fair to provide key facts that he fails to mention.

Yes, California has a world-class economic output, but it is largely due to one very narrow sector, the high-tech industry of Silicon Valley, which has brought enormous benefits to its entrepreneurs and capital investors.

However, the industry is in the process of being shaken up due to the phenomenon of artificial intelligence and that’s it closing thousands of jobsthereby further concentrating wealth.

Meanwhile, the state’s other world-famous sector, Southern California’s film and television industry, is suffering severely as manufacturing migrates to other countries and nations — so bad that the state gives subsidies in an attempt to slow the bleeding.

Since the COVID-19 pandemic, California’s unemployment rate has routinely ranked among the the highest nationwith a million members of its workforce are out of work.

Beacon Economics, a major consulting firm that closely tracks the economic situation in California says it like this: “On the one hand, California’s economy is in good health. Although official figures for the last quarter are still being calculated, the state’s economic growth comfortably outpaced the national average of 2.5 percent in 2025, tracking to an annual growth rate of nearly 3 percent.

“At the same time, the labor market is contracting. California now has the highest unemployment rate of all fifty states in the Union, hovering at 5.5%, and the labor market appears to be going in the wrong direction. the total number of jobs in California actually shrank down 0.6 percent since the start of this year, making it the 17th worst-performing state in the nation for job creation.

One result of these conflicting data is one of the highest levels of income inequality in the nationas a recent report by the Public Policy Institute of California points out. Only eight other countries have larger gaps.

“The gap between California’s top and bottom incomes has widened significantly (by 57%) since 1980, when families at the top earned seven times more than those at the bottom,” said the PPIC report, reflecting a 72% increase in income for those in the top decile of income, but a 19% increase for those in the bottom decile.

The Census Bureau’s calculation of poverty, which includes the state’s staggering cost of living, puts California’s rate was the highest at 17.7 percent, tied with Louisiana. A similar calculation by PPIC and the Stanford Center on Poverty and Inequality puts it at 16.9 percent, while another 17.9 percent of the population is “near poor.”

About 15 million Californians are poor enough to qualify for health care under the state’s Medi-Cal program, but, as Newsom failed to mention in his presentation at the Center for American Progress, his new budget reduces Medi-Cal eligibility for some Californians to shrink the state’s chronic budget deficit, which he also failed to mention when reciting cherry-picked data.

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