ARTICLE
In a recent survey by Goldman Sachs, 10,000 Small Business Voices stated the biggest challenge facing California small businesses is a labor shortage. A whopping 98% of small business owners in the Golden State say that difficulty hiring is affecting their bottom line, according to Goldman Sachs’ survey, released on Monday. That’s far more than the 81% who pinpoint inflation, the 77% who cite supply chain issues and the 70% who identify the surge in COVID-19 cases that have impacted their revenue. This news counters what we so often hear of late – that California’s economy is improving. According to the latest reports from the Economic Development Department (EDD), our unemployment rate fell to 6.5% in December 2021 as employers added 50,700 jobs, which amounts to more than a quarter of the nation’s overall job growth. Governor Newsom took to the airwaves by praising California’s “oversized” role in job creation. However, former EDD director Michael Bernick sees a different storyline for our state: The disappearing workforce. “The number of Californians listed as employed — in payroll jobs or as independent contractors — did increase over the month by 116,900 persons. However, it remains 919,800 workers below the number of workers employed in California in January 2020, just before the pandemic,” Bernick stated. Beacon Economics seems to reflect a similar view of the job recovery disparity between the U.S. and California. Click here for their latest report: https://beaconecon.com/publications/the-beacon-outlook/california-outlook/ California’s relatively elevated unemployment rate is one of the most striking features of the state’s recovery from the pandemic. Prior to the crisis, California’s unemployment rate was 4.1%. In October 2021, the unemployment rate stood at 7.3%, compared to 4.6% unemployment in the United States overall. The difference between the two is chiefly due to the jobs recovery that has occurred since the depths of the pandemic fallout. There are still 5% (900,000) fewer jobs in California than there were prior to the pandemic, compared to only 2.8% fewer jobs nationally. In some other states, the number of jobs has preceded pre-pandemic levels. Checking with another trusted economist from the California Forecast Report, Mark Schniepp writes, “The pandemic’s disruption on the labor market was originally catastrophic but conditions have dramatically improved, and for some regions of California the labor market is back to its pre-pandemic status. In general, however, it’s not that people can’t find a job, it’s that they don’t want to work.” Look at this graph showing the number of workers quitting their job in the U.S.: https://californiaforecast.com/january-2022/ The California Forecast report also notes the length and depth of the labor market impact: “The return of many workers who had left the labor market during the pandemic because of childcare or eldercare responsibilities will take place over a longer period of time than was predicted earlier in 2021. We had expected that the reopening of schools in August and September last year would bring a large influx of parents who had been unable to work back into the labor force. Other workers are staying out because of illness, concern over the virus, or excess savings built up in 2020-2021 due to stimulus checks and/or the federal unemployment bonus. Furthermore, about 2 million more workers than expected ended up retiring.” State leaders are aware that workers are disappearing and the Governor’s recent budget blueprint proposes new workforce development programs on top of the more than 20 approved in last year’s budget. But the state Legislature’s nonpartisan fiscal analyst (LAO) raised questions about that approach in a presentation last week to the Senate budget committee: “Can so many efforts be effectively launched at once? What are the specific problems the state aims to solve with all these efforts?” County Labor Employment Unemployment Rate State Total 19,065,800 18,105,400 960,400 5.0% Monterey 208,400 193,500 14,900 7.2% Santa Cruz 131,100 124,000 7,100 5.4% San Benito 31,500 29,700 1,800 5.7% Santa Clara 1,042,900 1,012,800 30,100 2.9% Let’s look at the local labor workforce numbers for our region for Santa Cruz, Monterey, San Benito and Santa Clara for comparison’s sake (above). These numbers show a remarkable improvement, yet in a cursory look around our county there remains a large number of empty buildings and office space, and at almost every storefront window there is a “We’re Hiring” sign. The next two quarters of 2022 will be telling for our state and local economy. The pandemic and Omicron virus continue to negatively impact all job sectors and especially the health, first responder employees and those in direct contact with the public — think restaurants, hotel employees, retail and grocery outlets. We are on a rocky cliff overlooking an unsettled economy. Human reaction to the variants and response from our public sector on programs to help us navigate the current conditions will be in full swing as we move from slower winter months to the springtime where our economy begins to pick up. Two conditions—online shopping and remote working—are going to be with us for the long haul. The extent of online shopping is likely to only accelerate with the Omicron virus. I have heard from business colleagues, family and friends that they have stopped the twice-weekly trip to the grocery store by buying online for convenience and health and safety precautions. The extent to which remote working will continue is unclear as many supervisors can’t monitor their at-home employees. Here are other trends to watch in the next month or so: Credit card spending has softened in recent weeks, especially for travel. Restaurant bookings have now moved lower. Companies are suspending their return-to-office plans, and schools are moving back to virtual instruction during the first weeks of January into early February. All of these conditions are subject to shift as the virus subsides as we have seen in other parts of the country. However, several unknown factors remain out there that we generally have little control over and which impact the national economy. The ever-present U.S.-Russia conflict where Russia is on the verge of invading Ukraine.The huge swings in the stock market and the Feds’ concern to curb inflation (the highest it has been in forty years) with increases in interest rates. Current wisdom says to stay resilient and we’ll get over this latest round of virus surges to return to a “New, New Normal.”
In a recent survey by Goldman Sachs, 10,000 Small Business Voices stated the biggest challenge facing California small businesses is a labor shortage. A whopping 98% of small business owners in the Golden State say that difficulty hiring is affecting their bottom line, according to Goldman Sachs’ survey, released on Monday. That’s far more than the 81% who pinpoint inflation, the 77% who cite supply chain issues and the 70% who identify the surge in COVID-19 cases that have impacted their revenue.
This news counters what we so often hear of late – that California’s economy is improving. According to the latest reports from the Economic Development Department (EDD), our unemployment rate fell to 6.5% in December 2021 as employers added 50,700 jobs, which amounts to more than a quarter of the nation’s overall job growth. Governor Newsom took to the airwaves by praising California’s “oversized” role in job creation. However, former EDD director Michael Bernick sees a different storyline for our state: The disappearing workforce. “The number of Californians listed as employed — in payroll jobs or as independent contractors — did increase over the month by 116,900 persons. However, it remains 919,800 workers below the number of workers employed in California in January 2020, just before the pandemic,” Bernick stated.
Beacon Economics seems to reflect a similar view of the job recovery disparity between the U.S. and California. Click here for their latest report: https://beaconecon.com/publications/the-beacon-outlook/california-outlook/
California’s relatively elevated unemployment rate is one of the most striking features of the state’s recovery from the pandemic. Prior to the crisis, California’s unemployment rate was 4.1%. In October 2021, the unemployment rate stood at 7.3%, compared to 4.6% unemployment in the United States overall. The difference between the two is chiefly due to the jobs recovery that has occurred since the depths of the pandemic fallout. There are still 5% (900,000) fewer jobs in California than there were prior to the pandemic, compared to only 2.8% fewer jobs nationally. In some other states, the number of jobs has preceded pre-pandemic levels.
Checking with another trusted economist from the California Forecast Report, Mark Schniepp writes, “The pandemic’s disruption on the labor market was originally catastrophic but conditions have dramatically improved, and for some regions of California the labor market is back to its pre-pandemic status. In general, however, it’s not that people can’t find a job, it’s that they don’t want to work.”
Look at this graph showing the number of workers quitting their job in the U.S.: https://californiaforecast.com/january-2022/
The California Forecast report also notes the length and depth of the labor market impact: “The return of many workers who had left the labor market during the pandemic because of childcare or eldercare responsibilities will take place over a longer period of time than was predicted earlier in 2021. We had expected that the reopening of schools in August and September last year would bring a large influx of parents who had been unable to work back into the labor force. Other workers are staying out because of illness, concern over the virus, or excess savings built up in 2020-2021 due to stimulus checks and/or the federal unemployment bonus. Furthermore, about 2 million more workers than expected ended up retiring.”
State leaders are aware that workers are disappearing and the Governor’s recent budget blueprint proposes new workforce development programs on top of the more than 20 approved in last year’s budget. But the state Legislature’s nonpartisan fiscal analyst (LAO) raised questions about that approach in a presentation last week to the Senate budget committee: “Can so many efforts be effectively launched at once? What are the specific problems the state aims to solve with all these efforts?”
County Labor Employment Unemployment Rate
State Total 19,065,800 18,105,400 960,400 5.0%
Monterey 208,400 193,500 14,900 7.2%
Santa Cruz 131,100 124,000 7,100 5.4%
San Benito 31,500 29,700 1,800 5.7%
Santa Clara 1,042,900 1,012,800 30,100 2.9%
Let’s look at the local labor workforce numbers for our region for Santa Cruz, Monterey, San Benito and Santa Clara for comparison’s sake (above). These numbers show a remarkable improvement, yet in a cursory look around our county there remains a large number of empty buildings and office space, and at almost every storefront window there is a “We’re Hiring” sign.
The next two quarters of 2022 will be telling for our state and local economy. The pandemic and Omicron virus continue to negatively impact all job sectors and especially the health, first responder employees and those in direct contact with the public — think restaurants, hotel employees, retail and grocery outlets. We are on a rocky cliff overlooking an unsettled economy. Human reaction to the variants and response from our public sector on programs to help us navigate the current conditions will be in full swing as we move from slower winter months to the springtime where our economy begins to pick up.
Two conditions—online shopping and remote working—are going to be with us for the long haul. The extent of online shopping is likely to only accelerate with the Omicron virus. I have heard from business colleagues, family and friends that they have stopped the twice-weekly trip to the grocery store by buying online for convenience and health and safety precautions. The extent to which remote working will continue is unclear as many supervisors can’t monitor their at-home employees. Here are other trends to watch in the next month or so: Credit card spending has softened in recent weeks, especially for travel. Restaurant bookings have now moved lower. Companies are suspending their return-to-office plans, and schools are moving back to virtual instruction during the first weeks of January into early February. All of these conditions are subject to shift as the virus subsides as we have seen in other parts of the country.
However, several unknown factors remain out there that we generally have little control over and which impact the national economy. The ever-present U.S.-Russia conflict where Russia is on the verge of invading Ukraine.The huge swings in the stock market and the Feds’ concern to curb inflation (the highest it has been in forty years) with increases in interest rates.
Current wisdom says to stay resilient and we’ll get over this latest round of virus surges to return to a “New, New Normal.”