The Center for Jobs and the Economy has released our initial analysis of the September Employment Report from the California Employment Development Department. For additional information and data about the California economy visit www.centerforjobs.org/ca.

Overall, the September data shows a continuation of the trends of the last few months in the California economic conditions.  Job growth was at a somewhat diminished rate, while employment although improving saw no substantial return to the labor force by workers who have been sidelined by the state ordered closures.  Employment growth in the state, however, was somewhat stronger than in the rest of the country.

Further recovery progress in the coming months will continue to be guided by the state-ordered restrictions within the counties.  In the most recent results from the Department of Public Health, only 10 counties as of October 12 are in the highest, Purple tier restrictions, but as indicated in the chart, these account for 46% of the state’s workers who are currently unemployed.  Combined, the two most restrictive tiers cover 37 counties with 89% of the total unemployed workers.  And again, these numbers only count the official unemployed and not workers who have left the labor force under the current conditions.  Continued progress towards recovery will be set largely by when these unemployed workers will be able to return to a job.

As the crisis continues to lengthen, however, the concept of recovery itself now has to consider an increasing series of factors.  It is no longer a quick “V” or more subdued “U” shaped return of workers to their prior jobs.  The issues have now become more of what jobs will be there to return to and which workers will be able to do so.

As indicated in prior month reports, the economic effects have been felt more strongly in lower wage households.  Higher wage households continue to show less severe income effects as indicated in continuing strong data on weekly state income tax withholding.  While showing a dip for the week of October 12, withholding overall since March has been running 2.4% above the comparable period in 2019.  

Based on State Controller and Department of Finance reports, total state general fund revenues through the end of September in fact have been running $8.5 billion ahead of the projections contained in the current Budget Bill.  If only continuing at this rate, higher than projected revenues alone would erase nearly 60% of the $54 billion deficit on which the Budget Bill is based.  Combined with the current draw on reserves, nearly three-quarters of that deficit will be covered by the fiscal resiliency mandated under Proposition 2 and the economic resiliency being shown through telecommuting, marketing channel shifts in the delivery of goods, and other potentially permanent changes within the state’s economic structure.

To date, concerns over equity have been focused through a single, public health lens.  While this policy choice is understandable given the initial uncertainties over the nature, extent, and severity of the public health aspects, the continuing disparate effects of the economic components are raising other critical equity concerns both in the near term and in the longer term as the crisis lengthens.

Education and the continuing debate on opening of the schools is a clear example.  California Teachers Association on one hand has essentially called for a zero public health risk guarantee.  The mayors of the state’s 13 largest cities on the other hand have urged actions to enable more students to return to in-classroom learning.

While most households in the state have some level of internet access, the most recent Household Pulse Survey indicates that degree of access required for distance learning varies significantly by household income.  About a fifth of the lowest income levels do not have internet that is always or usually available for education.  Access also varies by region, with high cost Bay Area showing much wider disparity.

Other outcomes from past state policies further limit distance learning for many households.  The state’s housing policies have produced a sustained housing supply crisis that has forced many households to turn to overcrowding as their only economic solution.  The most recent 2019 American Community Survey results indicate 8.3% of California households are overcrowded (defined as more than one person a room) compared to only 2.8% for the rest of the US.  This rate also varies widely, ranging from 2.4% for non-Latino Whites, 5.0% for African-Americans, 8.6% for Asians, and an abysmal 18.4% for Latinos.  The opportunity for equal quality of distance education under these conditions has a substantial barrier to overcome, either considered on its own or in combination with the equally daunting challenges overcrowding presents for household members seeking to telecommute in order to juggle the resulting childcare responsibilities.  Quiet spaces for children to learn and caregivers to work are not equally available under the state’s current housing conditions.

The continued dominance of distance learning even in counties where the state has determined schools could reopen instead has led many households, especially lower income households, into a choice between a job and childcare.  The prevalence of telecommuting among higher wage workers gives the option of juggling these responsibilities while working from home.  Restrictions on telecommuting for lower wage workers—either as a result of the nature of the job or due to restrictions under state regulations—turns the option into a stark choice.

The operations of the state’s public schools in the pre-COVID period produced a sustained gap in educational progress.  The two charts below provide a generalized assessment based on students (grades 2 or 3 through 11) testing at proficient and above for English and Math.  While the tests in the two periods shown are not strictly comparable, they do indicate there has only been marginal improvement over time.  More critically, they indicate that the gap between Latino, African-American, and Socioeconomically Disadvantaged students compared to White and Asian students is substantial and persistent even with the $37 billion increase in total K-12 funding ($6,286 increase per ADA) prior to the current crisis.

The current system of distance learning and in particular the differences in delivery quality combined with the inherent challenges discussed above threaten to widen these gaps further.  The result being additional pressures on the lifetime earnings potential of the students most negatively affected.  A recent analysis from the Wharton Budget Model at the University of Pennsylvania  estimates that K-12 students on average have lost an additional $12,000 (grade 6) to $15,000 (grade 12) in life-time earnings potential for each month of school closure to date, for a total of $2.8 trillion in future earnings loss for current students just from the school closures in Spring and September 2020. 

The long, shallow recovery from the 2008 recession particularly in California produced a depression on wages for the long-term unemployed, contributing to the income inequality that worsened for some groups in that period.  The current schools situation threatens to recreate these conditions on two levels:  (1) diminishing the earnings potential of students with fewer resources to supplement let alone access the distance learning that now is standard in most areas of the state and (2) forcing their parents to choose between working or childcare, with the risk that they consequently may find themselves last in line as jobs finally open up in a recovery.