Walters: Why California may be destined for a downturn

California’s economy is booming with record-high employment, record-low unemployment and billions of extra tax dollars flowing into the state treasury.

The official jobless rate dropped to 4.3 percent in February, only slightly above the national rate of 4.1 percent and nearly a full percentage point lower than it was a year earlier.

“The record low unemployment rate signals a taut labor market, but the labor force has been growing at a moderate pace and has enabled the state’s industries to continue hiring,” Robert Kleinhenz, director of research at Beacon Economics and the Center for Forecasting at the University of California-Riverside, said in a recent report.

“Looking at individual industries, continued increases in construction jobs reflect ongoing strength in that sector, while California manufacturing has seen a welcome surge in hiring in recent months following a slowdown at this time a year ago.”

The state Department of Finance reported that while February’s tax collections were slightly below the state budget’s assumption, overall revenues for the 2017-18 fiscal year are $2.6 billion above expectations.

So what’s not to like?

Well, for one thing no one knows how long the current boom will last. The state averages one economic boom and one bust per decade and California’s recovery from the Great Recession now has lasted well beyond historic expectations. In other words, as Gov. Jerry Brown, the Capitol’s resident economic worrywart, often points out, California is overdue for a downturn.

That’s why he wants to squirrel away as much as politically possible of the state’s current flood of revenues, saying they’ll be needed if the economy tanks, even though his “rainy day fund” would be quickly exhausted by even a moderate recession.

Brown’s fellow Democrats in the Legislature are more inclined to spend the bounty, particularly on expanding health coverage to more of the poor, setting up a potential confrontation in …read more

Source:: The Mercury News – Business


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