California’s Evolving Economy – California Public Policy Institute

California is especially in a period of economic uncertainty, with great uncertainty about the future. Of course, the pandemic continues to reverberate in impressive and unexpected ways. At the same time, severe international conflicts are impacting energy prices and creating other pressing challenges. Even in the midst of these changes and risks, it is difficult to predict the short-term direction of the economy. The historical patterns that usually help us understand economic trends are no clear guide today.So what can Do we now know where California’s economy is headed?

California’s recovery has been swift and even shows signs of generating equitable growth across regions and racial/ethnic groups. The unemployment rate in July (3.9%) was the lowest at any point in at least 40 years. Today’s major challenges include meeting labor needs as employers struggle to fill vacancies, and mitigating the massive price increases of the past two years.

To understand where California’s economy is headed from here, we need to look at how fundamentals have changed as we emerge from the worst of the pandemic, and what that means for policy choices going forward. should be investigated. In my assessment, the biggest changes he’s focused on are three main areas. How do you work and how do you want to work? and the availability of major federal investments. In each case, California’s long-standing economic challenges—high cost of living, rising inequality, and persistent poverty—intersect with emerging realities.

The places where we work, live and operate are in the midst of dramatic change. Remote and hybrid work is reshaping the location calculation for home office businesses. Pre-pandemic, about 5% of workdays were done from home, but now about 30% (just over one day a week) work from home nationwide. In larger cities and metropolitan areas, it’s even higher: 37% in Los Angeles and 40% in the Bay Area (about two days a week). If the remote work trend stabilizes at this level (which it seems to have in the last few months), it will be one of the biggest (and fastest) shifts in the labor market in decades.

Figure - Remote work is reshaping the labor market

Remote work is common in some sectors, especially high-paying jobs such as information and finance, and sectors skewed toward highly educated workers in industries. In other mostly low-wage sectors such as food service, transportation and retail, it is rare. However, the shift to remote work has impacted many sectors, and companies serving office workers are experiencing what appears to be a sustained shift in demand that will impact their bottom line. I’m here.

California has also seen a shift in where people have chosen to live during the pandemic. Some of these changes are likely to be permanent as remote work now settles into a permanent pattern. , the place of business may also change. The cost of housing, commercial real estate, and other living expenses are all exacerbated by inflation, putting pressure on these choices. California’s housing and business cost policy decisions can make a meaningful difference. California will continue to be a high-cost state thanks to its natural comforts, but policies can alleviate cost pressures in a number of ways.

What Californians Look for in a JobWhat actually supports the workcrystallized in a new wayAfter the initial flurry of job cuts due to the pandemic, Californians are back to work. Today, the proportion of adults in the workforce is similar, but the number of unemployed people is lower than before the pandemic (62.4% today compared to 62.8% before the pandemic). But there is still a lot of shuffling going on as wage growth, job openings and retirees remain higher than historical levels. There aren’t many unemployed people in California who can fill current vacancies, highlighting corporate workforce planning. Long-term demographic factors such as an aging population, declining immigration, and increasing immigration from California are also stressors in meeting workforce needs.

Figure - The labor market is very tight even compared to before COVID-19

Many Californians are switching jobs to take advantage of higher wages and flexibility. However, workers tend to change jobs within the same industry. In other words, the potential benefits of higher wages and greater flexibility are limited by differences between occupations. Therefore, it also varies by gender, race/ethnicity, education and income line. It is critical that employment opportunities are not restricted due to inequitable access to training and education. In the short term, it may take time for workers to seek out and acquire new skills, so workers may not see significant immediate gains, but in the long term, education and workforce readiness (or A robust, comprehensive and proactive approach to retraining) is essential. The economic future of California and the people of California.

One aspect of job flexibility that has become apparent during the pandemic is the ability to meet the care needs of children and dependents. Although remote work offers the ability to attend to family care needs, all jobs must nevertheless have family care needs met. The state’s recent interest in developing policies to care for its youngest and oldest residents will also support a strong workforce for the future.

Federal investments have the potential to reshape the state’s future if used effectivelyThere has been a staggering amount of federal investment in the state in recent years. Federal assistance to families during the worst of the pandemic discount Reducing poverty and income inequality in California, federal business bailouts have injected billions into the state’s economy. California is still using pandemic-era federal funds to support local economic recovery and development, and is preparing to deploy major infrastructure investments and new resources to shape climate change. The extent to which these investments will shape the future of the state’s economy will depend on how effectively California identifies optimal uses for new funds, manages complex projects, and unlocks new employment opportunities for its workforce. It depends on how you prepare. This is certainly a big challenge for California, with its tremendous diversity of regions, communities and people. Comprehensive regional approaches such as the state’s Community Economic Recovery Fund (CERF) show promise, leveraging successful models such as Fresno Drive.

Going forward, these three major changes could result in myriad consequent shifts in California’s economic landscape. How they play out across our diverse states remains to be seen. But what is clear is that Californians as workers, business owners and policy makers must adapt and work together to sustain a prosperous economic future for all.

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