CSAC Bulletin Article

Taking the Pulse of California’s Economy

October 26, 2023

What Are People Saying?

In early 2022, on the heels of an unprecedented, ceiling-shattering budget surplus, the Governor’s Administration first introduced an economic talking point that continues in 2023 to be a mantra in press releases and budget documents: expect continued, but slowing economic growth that stops short of assuming a recession.

As the dust from the 2023 legislative session settles, many minds turn to consider the year ahead and the future of California’s economy. Will the Administration continue this same line about the state’s revenue forecast in 2024? Can we predict or identify the tipping point that will trigger a recession or spur increased economic growth and a true recovery from the COVID-19 pandemic?

Throughout October, a few reports and data releases have been released that showcase the uncertainty within California’s economic landscape. This includes a broad spectrum of data and analysis, including last week’s report by the California Employment Development Department that California’s unemployment rate increased slightly in September, to 4.7 percent, to the monthly finance bulletin from the California Department of Finance, which reports the state’s General Fund cash receipts for September 2023 were 5.7 percent ($796 million) above the forecasted revenues for the month.

This news may not surprise some, as local governments are keenly aware that  although California statewide regained all jobs lost at the height of the COVID-19 pandemic, recovery has not been consistent across industries. It is true that, in the aggregate, as of September 2023 California has added 436,400 more nonfarm jobs than it had in February 2020 at the state’s pre-pandemic high. However, drilling down into the details shows as of September 2023, local government jobs in California (excluding educational services) are still 7,500 less than March 1, 2020. 

Meanwhile, the Legislative Analyst’s Office is similarly positioned, walking the line between acknowledging foreboding economic indicators that forecast a looming recession and simultaneously reporting that their state revenue outlook for the next three fiscal years is improved compared to their forecast at the 2023 Budget Act, just a few months ago. Of course, all bets are off for forecasting state revenues, as just last week the IRS issued a surprise extension for filing and paying 2022 taxes until November 16, 2023 for taxpayers affected by natural disasters. As California has had no shortage of presidentially declared natural disasters, residents in 55 out of 58 counties qualify for the extension. It is not known whether or to what extent this prolonged deadline will affect California’s revenue picture.

Beyond cold and dispassionate statistics and deadlines, Californians shared their sentiments on the economy in the most recent Public Policy Institute of California (PPIC) Statewide Survey,  with 28 percent of respondents naming jobs, the economy, and inflation as the most important issue facing California today. Underscoring the significance of this response, the response rate for the second-highest ranked issue was 14 percent for homelessness—only half that of the response rate for jobs, the economy, and inflation.  According to the PPIC, 66 percent of survey respondents expect poor economic conditions at the state-level in California in the next 12 months. However, there is some optimism for local governments, as half of respondents believe that their local economy will be about the same six months from now.

While we don’t have a crystal ball to predict what will come next, it seems for the time being that all reliable signs point to a continued slowing economy. With California’s historic boom-and-bust revenue cycle as the mainstay of government budgeting, an economic lull or plateau is an uncomfortable, foreign place to be.

For further resources to monitor the health and direction of California’s economy, counties can access the publications and datasets listed below or attend the Government Finance and Administration Policy Committee meeting during the 129th CSAC Annual Meeting in November.  

Keeping Up – Economic Monitoring Available to Counties

California Department of Finance’s Finance Bulletin

The California Department of Finance announced on Monday they are launching an interactive dashboard that will accompany the department’s monthly finance bulletin. The monthly Finance Bulletin, introduced in 2009, is an economic update and cash report that notes state and national economic trends. The new interactive dashboard reports on this data with enhanced data visualization and multiple interactive charts. One feature of the interactive dashboard allows users to change the scale of a chart that shows U.S and California CPI Inflation rates over time to display, for example, the change in CPI between just before the onset of the COVID-19 pandemic and present day. Other interactive features include California median home sales compared to median home prices over time, comparisons of actual and forecasted revenue receipts, and more. You can receive an email notification when the newest edition of the Finance Bulletin is published by subscribing to the finance bulletin mailing list.

Legislative Analyst’s Office’s Fiscal Outlook

The Legislative Analyst’s Office’s (LAO) annual Fiscal Outlook publication provides an independent assessment of the California state budget condition for the upcoming fiscal year. The publication also includes a forecast of the state’s longer-term condition, typically a three-year period following the upcoming fiscal year. The LAO’s 2023-24 Fiscal Outlook, published in November 2022, accurately forecasted the state’s budget deficit for fiscal year 2023-24. The 2024-25 Fiscal Outlook is expected to be published on or after Wednesday, November 15, 2023, and will include the LAO’s assumptions about the state’s economy for fiscal years 2024-25 through 2027-28 and how the state’s economy affects the state’s annual revenues and expenditures. As state and federal funds account for nearly half of county revenue on average, fiscal forecasts and analysis of the state’s economic condition can help counties prepare balanced and sustainable budgets. You can receive an email notification when the LAO publishes the 2024-25 Fiscal Outlook by subscribing to the LAO news releases.

California Employment Development Department’s Data Library

The California Employment Development Department’s (EDD) maintains and publishes a data library regarding California industries, occupations, employment projections, wages, and labor force. The data library includes tools available to counties to monitor monthly labor force and unemployment rate data by countyGIS interactive mapping to display labor force and unemployment data, and more. Further, the EDD provides an unemployment insurance claims data dashboard tool that shows claim data broken out by county, industry, and other demographics.  You can receive email notifications when the EDD publishes updated information to the data library and other resources by subscribing to EDD news releases.

But Wait, There’s More! The Fiscal Outlook and the 2023 CSAC Annual Meeting

CSAC’s 129th Annual Meeting will be held in Alameda County from November 14 – 16. The Government Finance and Administration Policy Committee meeting during the Annual Meeting is scheduled for Thursday, November 16 at 9:30am. During the Policy Committee meeting, attendees will receive a briefing on the Legislative Analyst’s Office’s 2024-25 Fiscal Outlook. County officials will also provide commentary and perspectives on the implications of the economic and fiscal forecast for county budgets and fiscal sustainability.

Online registration to attend the Annual Meeting is open until Friday, October 27, 2023.

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