Amid policy and pandemic, will California employment rebound?

The year 2021 was a long year battling COVID-19. As coronavirus restrictions ease under Gov. Gavin Newsom’s SMARTER Plan in 2022, we turn to the Golden State’s labor market. Is it on track to rebound to its pre-pandemic shape? Here are the employment numbers, then and now.

In March 2020, when Gov. Newsom issued a mandate to cut the transmissibility of the airborne coronavirus that closed businesses and schools, there were 18,304,600 employed Californians and the unemployment rate was 4.5 percent.

California’s job deficit will not disappear overnight the way that employment in service sector occupations such as hospitality and food and beverage establishments did…

Fast forward to December 2021, with 17,836,800 employed Californians and a 6.5 percent unemployment rate. The December 2021 employment data is the most recent available.

California employment is down 467,800 jobs since March 2020, when the COVID-19 pandemic began officially. Given that California’s labor force is the biggest in the U.S., and the state has a $3 trillion economy, the loss of close to a half million jobs due to pandemic policies is a sharp employment deficit with multiple impacts on buyers, sellers, employers and employees.

California’s job deficit will not disappear overnight the way that employment in service sector occupations such as hospitality and food and beverage establishments did after Gov. Newsom’s pandemic policies.

Government policies that affect employees’ earnings and spending loom large for the overall business climate.

If the past and present of California government policies show anything, it is that they are necessary in ways big and small to solve problems in the marketplace. In the case of the coronavirus employment shakeout, Gov. Newsom’s recent action is a case in point.

In theory, his SMARTER plan can create conditions for employment to grow via adopting public health measures to move the state from a pandemic to an endemic mode, or “learning to live with COVID-19.” That approach requires adjusting state policies around mask mandates, and coronavirus tests and vaccines, as public health conditions evolve. This appears to be a when, not if, policy of adaptability to pandemic transmissibility.

Consider this. An Omicron subvariant BA.2 is present in some parts of the world. The California economy depends on trade and tourism, bringing goods and people from around the world to the Golden State. If for no other reason than such globalization of commerce, the governor will modify his SMARTER plan as coronavirus conditions change, perhaps sooner rather than later.

If new California gender pay equity legislation becomes law, it would also boost the spending power of women workers.

In the meantime, employed workers spend their wage-income on goods and services that businesses rent and sell. On that note, government policies that affect employees’ earnings and spending loom large for the overall business climate.

For example, minimum wage increases fuel employee buying, especially in lower-pay jobs such as service and union-free employment, where at-will labor is the norm, though changing with Amazon and Starbucks workers organizing for labor union representation.

If new California gender pay equity legislation becomes law, it would also boost the spending power of women workers. They continue to earn lower hourly earnings versus their male counterparts in the labor force.

The federal child tax credit had acted as an economic stimulus for workers by augmenting their wage-income and spending patterns.

Recently, state Sen. Monique Limón (D-Santa Barbara) introduced SB 1162 to close the gender wage gap. SB 1162 would require public disclosure of salary ranges on all job postings. The bill would also make employer internal promotional opportunities accessible to current workers, while making firms report pay data broken down by race, ethnicity, and sex for both direct employees and temporary employees on the payroll via a third-party staffing agency. “Pay transparency is key to achieving pay equity,” Senator Limón said in a statement.

Meanwhile, there are also headwinds to offset laws and policies that boost workers’ incomes to increase their consumption of goods and services, and thereby generate job growth.

One example is the federal child tax credit that has ended. It had acted as an economic stimulus for workers by augmenting their wage-income and spending patterns. Therefore, the ending of the child-tax credit cuts household income, meaning workers spend less in the marketplace, thus weakening job growth.

Re-localizing manufacturing could also spur employment growth in the Golden State given the fiscal and logistical challenges of supply chains dependent on shipping goods from abroad.

The COVID-19 pandemic revealed the costs, previously a bit hard to see, of transporting foreign-made goods to California businesses and consumers. But it is clear policies such as Gov. Newsom’s executive order of last Oct. 21 to address supply chain problems point to the challenges of making and bringing goods to the market in the pre-pandemic way.
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Editor’s Note:  Seth Sandronsky reports regularly for Capitol Weekly. Contact him at [email protected].