While the state has become known for its mounting troubles, at least the California economy is growing. But all isn’t as well as it might seem. When compared the rest of the country, California’s jobs market is one of the weakest.
Federal Bureau of Labor Statistics show California’s total employment is stuck at a little more than 18 million. It’s of course the largest number in the nation, but there’s been no growth, with total non-farm employment falling 0.1% from December 2024 to December 2025. Texas, Florida and other red states that have been villainized by California politicians posted gains.
To be fair, employment fell harder in 11 states, but if California were the economic powerhouse of its earned-long-ago reputation, then, outside of recessions, job growth should be a permanent condition.
“The adverse consequences are becoming harder to ignore,” says PRI senior fellow WayneWinegarden. “Job growth is stagnant and the number of non-health-related private-sector jobs is in outright decline even though the domestic economy is not in recession.”
California’s economy is growing, with the state gross domestic product now at about $4.3 trillion, up from about $3.2 trillion just before the COVID breakout. Yet its share of the national economy has fallen from a peak of 14.5% in 2021 to 13.8% in 2025.
“Had the state simply maintained its 2021 peak share, California’s economy would be 4.6% larger today,” says Winegarden. That would be “the equivalent of an additional $14,000 for every household.”
“These trends illustrate that, unlike the previous decade, California has not been the country’s economic leader in the 2020s,” he adds.
Last fall, Gov. Gavin Newsom’s office bragged about California “setting the pace for the nation” and boasted of its “nation-leading GDP.” A few months earlier, he claimed that “our economy is thriving because we invest in people, prioritize sustainability and believe in the power of innovation.”
But much of “the pace” and the “thriving” can be attributed to market cap increases among California’s legacy tech companies, which “have become the world’s most valuable companies,” according to the Legislative Analyst’s Office.
“The state’s five largest tech companies—Apple, Google, Nvidia, Broadcom, and Meta—are currently worth $15 trillion,” says the LAO. “Including California’s other large technology firms, the state’s tech companies make up more than 60 percent of the total value of the Nasdaq 100 index, a list of the 100 most valuable companies listed on the Nasdaq stock exchange.”
California’s job market has been mushy since businesses were forced to close during the pandemic. After taking the initial hit, the state’s GDP bounced back. But it turned out to be a jobless recovery, which can be defined as a “slow rebound in aggregate employment following recent recessions, despite recoveries in aggregate output,” or “when economic activity experiences growth but the unemployment rate remains high.” Without jobs, a recovery isn’t complete, says UCLA economist Lee Ohanian.
The state’s employment sclerosis should not be taken lightly. National Center for Biotechnology Information research indicates job loss is a “disruptive life event with a far-reaching impact on workers’ life trajectories.” In addition to the economic harm, “Displaced workers face psychological and physical distress, personal reassessment in relation to individual values and societal pressures, and new patterns of interaction with family andpeers.”
There is a way back. But, as it needs to be with so many other knots that have been tied over recent decades, California’s political class has to reverse decades of public policy that have held back progress. A soon-to-be-published PRI policy paper will examine California’s job crossroads and offer workable solutions.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute. Dr. Wayne Winegarden is a PRI senior fellow in business and economics.
