Beaconomics: Breaking Down Impact of COVID-19 on California’s Economic Future

By Dennis Kaiser

The COVID-19 pandemic, and the public health mandates implemented to control the infections’ spread, have created a record decline in U.S. economic activity. New research by Beacon Economics shows California’s economy has experienced similar distress, following record economic growth.

December 2019’s 3.7% unemployment rate marked the best unemployment rate in California history. Four months later, at 15.5%, April 2020 marked the state’s worst unemployment rate in more than 80 years, reports Beacon Economics. Today, now that stay-at-home health mandates have eased, California’s employment picture is certainly brighter than it was in April.

Beacon Economics’ Taner Osman, PhD, writes in an economic forecast for the Golden State, “How the public reacts to an increased number of cases remains to be seen, and their reaction will be critical to understanding how quickly the economy returns to trend, since there is evidence that the economy started to contract before stay-at-home orders were put in place. How quickly the economy returns to full speed, will rest largely on the willingness of the public to return to their regular routines.”

In April 2020, total nonfarm employment in California fell by 2.3 million positions compared to the month earlier. This represents a 13.5% drop in the number of nonfarm jobs in the state over the course of just one month. The number of jobs in California has not been this low since March 2013. Seven years of job gains lost in the blink of an eye, notes Osman. Thought from March to April, 1.8 million workers were added to the state’s unemployment ranks.

The number of unemployed workers, at nearly three million, is now the highest on record. Just as alarming is the drop in labor force participation. From February to April 2020, the civilian labor force shrank by one million workers in California, as many became discouraged and stopped their search for employment. August 2012 was the last time the state’s labor force was this low.

From an economic perspective, all indications are that California’s labor market bottomed out sometime in late April or early May, notes Osman. “Significant damage was done to the labor market in a very short period of time and, unfortunately, those jobs will not return to the state’s economy as quickly as they were lost. At the same time, from these lows, we expect to see unprecedented employment and output growth in the state for the remainder of the year,” he writes.”

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