California ‘Jobs Gap’ Jumps to Record High

California’s “Jobs Gap” with the rest of America jumped to a record high, according to new calculations. In 2010, I devised the “Jobs Gap” to measure how much worse unemployment is in California than the rest of America.

The Jobs Gap is calculated by subtracting the national unemployment level from California’s. Of course, the major factor affecting California’s economy is national economic policy. What the Jobs Gap calculation does is filter out the “noise” of the performance of the national economy. What’s left is the affect of California policy on state jobs.

As recently as 2006, the Jobs Gap was small – just 0.3 percentage points above the national average. Then it increased rapidly, until it reached a record level of 3.0 percentage points in 2011 (average for January to July).

What caused the increase? One culprit was the housing boom-bust, which hit California especially hard in 2007-08. But Arizona also was hit. Yet its current unemployment rate was 9.4 percent for July, just 0.3 percentage points above the national rate.

Another factor for California was that, after Gov. Arnold Schwarzenegger lost his 2005 reform election, he shifted to the Left on economic policy. In particular, he signed into law AB 32, the Global Warming Solutions Act of 2006. It mandates reductions in greenhouse gas emissions in California of 25 percent by 2020.

From 2003 to 2005, Schwarzenegger played the “goal tender” role of vetoing most jobs-killer bills. Hence, the state’s economy performed fairly well, as the Jobs Gap numbers show.

But his signing of AB 32 in 2006 indicated he not only had fallen down as the “goal tender,” but was actively helping the other side – the jobs-killing side – score points. There was no one left with any power in California to defend jobs.

Gov. Jerry Brown, in office since Jan. 3, 2011, has only made matters worse. The Jobs Gap soared to 3.4 percentage points in February 2011, but then started declining as the national economy improved, down to 2.6 percentage points in May and June. California exports also have been strong.

But in July, the Jobs Gap began increasing again, to 2.9 percentage points. It’s too early to say why this is happening. But Brown has been as relentless as Schwarzenegger in attacking jobs. In particular, Brown signed a law mandating that one-third of California’s electricity must be generated by renewables by 2020. It likely will sharply raise energy costs.

“Jobs creation was dismal in July, when only 4,500 more jobs were created than in June” for California, Esmael Adibi told me; he’s director of the A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University. “In the summer months, high school kids and college graduates join the work force. My concern is: What happens in August with the jobs numbers? Lots of things are going wrong. The stock market has been declining. Then there are the problems with the European banking system.”

Only in the last few weeks has Brown noticed that California just isn’t creating enough jobs. He appointed as his new Jobs Czar Michael Rossi. In my article, “Brown’s ‘Jobs Czar’ Really a Bailout King,” I broke the story that Rossi’s was a banker whose main accomplishment was grabbing federal bailout money, not creating real jobs. And last week Brown released a gimmicky jobs plan that won’t help at all.

The real solution is to sharply cut California taxes and regulations. Until California ends its attacks on jobs, the Jobs Gap will remain high.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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