California’s economic growth has stalled, affecting major sectors despite political narratives highlighting strength and innovation. Governor Gavin Newsom frequently touts the state’s $4-trillion-plus economy as one of the world’s largest and a model of progressive economic policy. However, recent data paints a different picture—one of stagnation, weak consumer demand, and labor market softness.
According to Gabe Petek, the Legislature’s budget analyst, the state has experienced a prolonged economic slowdown for nearly two years. Outside health care and government roles, California has not added private-sector jobs in 18 months. Employment levels have remained flat for two years, and the unemployment rate stands at 5.5%, the highest in the nation, with over one million residents unemployed.
The state also faces a structural deficit, where mandated spending exceeds reliable revenue streams. Programs introduced with fanfare, such as expanded health coverage for undocumented immigrants, had to be scaled back after costs doubled initial projections.
This downturn predates the current federal administration, undermining attempts to assign blame externally. More concerning is the decline within two of California’s most iconic industries: technology and entertainment.
Silicon Valley has seen job losses as companies pivot toward artificial intelligence. Amazon’s recent announcement of 14,000 layoffs—potentially doubling as it refocuses on AI—impacts operations across the state, including its warehouse network. While hiring continues in strategic areas, efficiency-driven restructuring is reducing overall headcount.
In Southern California, Paramount Global began cutting approximately 1,000 employees this week, marking the first phase of deeper reductions. The new leadership, under David Ellison, aims to “build a strong foundation for the future” through these measures. The cuts affect film production and subsidiaries like CBS, MTV, and Comedy Central. The Los Angeles Times reported that another 1,000 positions may be eliminated later, amounting to about 10% of the company’s workforce.
Film and television production in the region has been shrinking for years due to high operational costs and competition from states and countries offering tax incentives. Warner Bros. Discovery is currently on the market, reflecting broader instability in the sector.
Despite fiscal constraints, state leaders increased tax credits for local productions to $750 million this year in an effort to retain industry activity. However, the outflow of production jobs continues, signaling limited effectiveness of current incentives.
— news from Santa Monica Daily Press
— News Original —
Even California’s iconic industries are cutting back in this sluggish economy
As 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.
As 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.
Were it only true.
A year ago, the Legislature’s budget analyst, Gabe Petek, indirectly blew the whistle on Newsom’s braggadocio.
“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.
“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.”
Nothing 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.
Meanwhile, 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.
California 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.
It 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.
One 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.
Silicon 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.
Not all of those cuts are in California, of course, but the online seller has been heavily involved in California, operating multiple warehouses.
“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.
Meanwhile, the Paramount production conglomerate, a mainstay of the Southern California entertainment industry for decades, also announced payroll cuts as new owners took over.
Paramount 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.”
The 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.
Movie 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.
Despite 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.