The California Depression

Unemployment in the Golden State hits a record 11.5 percent. Where's our New Western Deal?


Andrew Leonard
June 19, 2009 8:35PM (UTC)

California's unemployment rate hit 11.5 percent in May, the highest ever recorded since modern record-keeping began, reports the Sacramento Bee.

Gov. Schwarzenegger's office was quick to release a statement:

"When the world loses one-third of its wealth in 18 months, it is to be expected that historic levels of job losses will follow. Not surprisingly, we and our fellow states have seen unemployment numbers rise sharply during this difficult time. A full recovery will not happen overnight -- it will take time, which only further underscores the need to continue the economic stimulus measures I fought for in the February budget. There is no greater priority right now than to stimulate the economy, create jobs and get California back on the road to prosperity."

Who knew the governator was a Keynesian?

California is far from alone. Calculated Risk passes along BLS data indicating that eight states are currently registering record unemployment rates, with Michigan leading the way at a whopping 14.1 percent. But given the size of California's economy, the implications for overall U.S. economic growth are daunting.

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On the optimistic side, there have also been some reports this week that home prices are stabilizing in both Northern and Southern California. Since California's woes began in the housing sector, they are likely to end in the housing sector as well, so any sign of improvement there definitely fits into the desperately desired green shoots category.

One other note: There has been much hooting in the conservative blogosphere that California's woes prove we can't afford a "nanny state" government determined to deliver a comprehensive set of social services to its citizens. But the proximate cause of the budget breakdown is a massive decrease in tax revenue directly tied to the bursting of the housing bubble. It is true, California's system of government-by-proposition and the straitjacketing of Prop 13 limit the state's flexibility in dealing with drastic changes in the economic situation, but we shouldn't be so quick to kiss the welfare state goodbye just because California is getting smacked around by a massive recession. If anything, now is when we need a stronger welfare state than ever.


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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