As Governor Gavin Newsom positions himself for a potential 2028 presidential run, he frequently highlights California’s economy as a model of innovation and inclusive growth. With an annual economic output exceeding $4 trillion, the state would rank as the world’s fourth-largest economy if it were an independent nation. Newsom emphasizes its entrepreneurial dynamism and progressive social programs as evidence of successful governance.
However, the economic reality presents a more nuanced picture. A year ago, Gabe Petek, the Legislature’s budget analyst, offered a sobering assessment, noting that California has experienced a prolonged economic slowdown marked by weak consumer spending and a stagnant labor market.
“While this slowdown has been gradual and the severity milder than a recession, a look at recent economic data paints a picture of a sluggish economy,” Petek stated while analyzing the state’s budget challenges. Outside of government and healthcare sectors, California has not added net new jobs in 18 months.
This stagnation persists. Employment levels have remained largely unchanged for two years. At 5.5%, the state’s unemployment rate is the highest in the nation, with over one million residents unemployed.
California also faces a structural budget deficit, where mandated spending exceeds reliable revenue streams. This imbalance undermines the sustainability of social programs that Newsom promotes. For instance, the state’s expansion of publicly funded healthcare to undocumented immigrants was rolled back after costs doubled initial projections.
It is important to note that these economic challenges predate Donald Trump’s presidency, making attempts to blame federal policies unfounded.
Two of California’s most iconic industries—technology in the Bay Area and entertainment in Southern California—are undergoing significant disruption. Silicon Valley has seen job losses as companies pivot toward artificial intelligence. Amazon recently announced 14,000 layoffs, with potential for further reductions, affecting operations in California, including its warehouse network.
“We expect to continue hiring in key strategic areas while also finding additional places we can remove layers, increase ownership, and realize efficiency gains,” said Beth Galetti, Amazon’s senior vice president of people experience.
In the entertainment sector, Paramount Global, a long-standing industry leader, began cutting approximately 1,000 jobs as new ownership seeks to restructure. These reductions affect film production and subsidiaries like CBS, MTV, and Comedy Central. The Los Angeles Times reported that up to 2,000 positions could be eliminated, representing about 10% of the company’s workforce.
Southern California’s film and TV production has been declining for years due to high operating costs and competition from states and countries offering financial incentives. Warner Bros. Discovery is currently on the market, reflecting broader industry instability.
Despite fiscal constraints, Newsom and the Legislature increased tax credits for local film and television production to $750 million this year. However, this subsidy has not reversed the trend of declining output.
While California continues to project economic strength on the global stage, underlying weaknesses in employment, budget sustainability, and key industries suggest a more complex reality. The state’s ability to maintain its leadership role will depend on addressing these structural challenges with pragmatic solutions.
— news from Times of San Diego
— News Original —
Opinion: Newsom cites California as economic model, but the reality is mixed
This column was originally published by CalMatters. Sign up for their newsletters. n nAs Gov. Gavin Newsom ramps up what appears to be a 2028 White House bid, a mainstay of his pitch during television interviews and social media appearances is California’s economy. n nAs Newsom tells it, the state’s $4-trillion-plus annual economic output is not only the fourth largest in the world, were it a nation, but it’s a model of entrepreneurial vigor and programs advancing equity. n nWere it only true. n nA year ago, the Legislature’s budget analyst, Gabe Petek, indirectly blew the whistle on Newsom’s braggadocio. n n“California’s economy has been in an extended slowdown for the better part of two years, characterized by a soft labor market and weak consumer spending,” Petek wrote while outlining the state’s deficit-ridden budget dilemma. n n“While this slowdown has been gradual and the severity milder than a recession, a look at recent economic data paints a picture of a sluggish economy. Outside of government and health care, the state has added no jobs in a year and a half.” n nNothing has changed since then. Employment has been stuck at virtually the same level for a couple of years. At 5.5%, California’s unemployment rate is the highest of any state, with more than a million workers lacking jobs. n nMeanwhile, the state has been overspending its revenues, creating what budget experts call a “structural deficit,” meaning spending programs locked into law are greater than the reliable income to fund them. n nCalifornia really can’t afford those compassionate services Newsom boasts about creating. He and the Legislature, amid great fanfare, extended state-paid medical care to undocumented immigrants, only to be forced to roll it back after costs turned out to be double their estimate. n nIt should be noted that what Petek saw a year ago, and remains fundamentally true today, pre-dates Donald Trump’s becoming president, so blaming him, which Newsom attempted earlier this year, is groundless. n nOne of the most troubling aspects of California’s wheel-spinning economy is the turmoil in two revered sectors, high technology in the San Francisco Bay Area and Southern California’s movie and television production industry. n nSilicon Valley has been shedding jobs for the past several years as it shifts emphasis to artificial intelligence. This weeks’ announcement that Amazon is cutting 14,000 jobs — and may eventually double that number as it focuses on AI — was a jolt. n nNot all of those cuts are in California, of course, but the online seller has been heavily involved in California, operating multiple warehouses. n n“We expect to continue hiring in key strategic areas while also finding additional places we can remove layers, increase ownership, and realize efficiency gains,” Beth Galetti, Amazon’s senior vice president of people experience, said in a memo to employees. n nMeanwhile, the Paramount production conglomerate, a mainstay of the Southern California entertainment industry for decades, also announced payroll cuts as new owners took over. n nParamount on Wednesday began cutting about 1,000 employees, the initial cohort of what could be much deeper cuts. David Ellison, Paramount’s new boss, said the reduction is aimed at “building a strong foundation for the future.” n nThe layoffs hit not only Paramount’s movie production, but also staff at its CBS television subsidiary, MTV and Comedy Central. The Los Angeles Times reported that another 1,000 jobs are expected to be cut later, bringing the total reduction to about 10% of Paramount’s workforce. n nMovie and TV production in Southern California has been declining for years as companies have coped with high costs and been lured to other states or nations with lower costs and subsidies. Another iconic movie company, Warner Bros. Discovery, is currently for sale. n nDespite California’s budget woes, Newsom and the Legislature increased state tax credits — in effect, cash subsidies — for in-state TV and movie productions to $750 million this year. But the hemorrhage has continued. n nCalMatters is a nonpartisan and nonprofit news organization bringing Californians stories that probe, explain and explore solutions to quality of life issues while holding our leaders accountable. n nWant to submit a letter to the editor, guest column or opinion piece? Find our guidelines and submission form here.