California Gov. Gavin Newsom says the state is now the world’s fourth largest economy. But after accounting for the high cost of goods and services, California only barely edges out low-performing Italy, with the state’s continued losses in private sector jobs amid falling corporate and sales tax revenue painting a darker picture of the Golden State’s economy.
“California isn’t just keeping pace with the world—we’re setting the pace,” said Newsom on the 2024 economic rankings. “Our economy is thriving because we invest in people, prioritize sustainability, and believe in the power of innovation.”
However, after accounting for purchasing power parity — how much can be purchased in the local economy with local currency, which provides a more accurate comparison — California’s economy is ranked 11th, at $3.6 trillion.
That’s just barely ahead of Italy and Turkey — at $3.6 trillion and $3.5 trillion respectively, and well behind the tenth-ranked United Kingdom at $4.3 trillion.
“While California enjoys a high GDP, it dissipates the effective purchasing power through high and increasing costs of living,” wrote the California Center for the Jobs and the Economy in a report. “Using the most current U.S. Bureau of Economic Analysis Regional Price Parities to adjust California’s current GDP to an equivalent statistic, California barely edged ahead of Italy from 12th to 11th highest when GDP is measured by IMF’s purchasing power parity series.”
“This shift in rank is a stark illustration of the extent to which the costs of living sap the economic reach of the state’s households,” continued CCJE.
When asked about the latest state employment statistics finding jobs fell as private sector jobs decreased more than government-funded jobs increased, CCJE president Brooke Armour highlighted the underlying weakness of the California economy.
“California’s March jobs report confirms a troubling trend: The state’s private sector is contracting, while employment growth is increasingly driven by government-funded programs,” Armour told The Center Square. “This is not a sustainable path to economic vitality. We need to focus on policies that encourage private sector investment and job creation, rather than relying on taxpayer-funded employment to drive our economy forward.”
The March preliminary jobs report found the state lost a net 11,600 jobs, while the February jobs loss of 7,500 was adjusted to a loss of 21,800. The state lost 26,800 private sector jobs from February to March, while gaining 15,200 government and government-supported jobs.
Of the net increase in 15,200 taxpayer-funded jobs, 10,400 were in the “Health Care & Social Assistance” category.
Should trends from the past year hold — in which 58% of “Health Care & Social Assistance” jobs come from “Individual & Family Services,” which in turn is “primarily” from elderly or disabled Californians using a taxpayer funds to pay household members part-time minimum wage to provide care, state employment is even weaker than the data suggests.
This, in turn, could create challenges for the state budget, with costs to maintain the current level of government services growing due to California inflation remaining well above national levels while the number of net-taxpayer private sector jobs declining.
