CHESSNOID

If you live in California like me this news of high unemployment is not a surprise. We are the level of literally seeing stores closing down everywhere you look. A sign of people not spending and clamping down on their budgets.

USA Today:

California’s unemployment rate has jumped to 9.3%, the highest in 15 years.

The 1% increase in December is the largest one-month jump since the state began tracking it in 1976, the San Francisco Chronicle says. Employers cut 78,200 jobs, pushing the official number of unemployed Californians to 1.7 million. That figure does not count people who have stopped looking for work or who are self-employed and not eligible for unemployment insurance.

It’s even worse in Los Angeles, where the rate is 9.9%, the Los Angeles Times says.

According to the Employment Development Department, the state’s highest recorded unemployment rate was 11%, during the deep recession of 1982.

The state is in its own budget deficit and Arnold is trying to get the legislative to compromise on a budget and pass it. LA Times:

California, the media like to tell us, faces an unprecedented fiscal crisis. The budget deficit is $40 billion and growing. The state is so short of cash that, within days, it may issue IOUs, rather than checks, to pay its bills. The Legislature, bitterly divided, seems unable to agree on a way out. The governor warns of “financial Armageddon.”

The good news is the State of California will get some of that stimulus package money that Obama will get approved soon. It won’t solve California’s problems but it will help.  LA Times:

The economic stimulus package congressional leaders are drafting would wipe out nearly a quarter of California’s budget shortfall, a potential windfall that could help end the impasse over how to close the nearly $42-billion gap.

The House bill, which is likely to be voted on next week, would bring the state more than $11 billion in healthcare and education money that could go directly to reducing the deficit through mid-2010, state officials learned Thursday night.

“This takes a big bite out of the state’s budget gap,” said Jean Ross, executive director of the California Budget Project, a Sacramento-based think tank. “It is better news than many of us had anticipated.”

The money would come from the $825-billion stimulus package that President Barack Obama has made a top priority. The package would also increase spending in California into 2011 for various federal programs, such as job training and food stamps

The bad news is it won’t solve the state budget crisis at hand. We basically have more expenses than revenue. California will either have to cut expenses (cut programs) or increase revenues (tax hikes). Unlike the Federal government, the state can not just print money. As our foreclosures continue to spike up and unemployment follows it, the state government need to come to an agreement on the budget before our credit rating gets cut which will make it even more expensive for us to borrow.

ABC news:

SACRAMENTO, CA – California is in danger of a lower bond rating because of its budget woes.

Moody’s Investors Service has warned it might downgrade California’s general bond rating because its finances have deteriorated.

The state is facing a $42 billion budget deficit through mid 2010 and could run out of cash in February.

A low credit rating could cost the state more to borrow money.

California’s GDP is in the top ten in the world. Hoover Institution:

California has the eighth-largest economy in the world.

In 2007, California’s gross domestic product (GDP) totaled 1.8 trillion dollars, accounting for roughly 13 percent of the U.S. economy. In per capita GDP, California ranked seventh in the nation, with $42,376 per person in 2000 dollars.

In 2007, the top seven economies, beginning with the topmost, were the United States, Japan, Germany, China, United Kingdom, France, and Italy. The next five largest economies (trailing California) were Spain, Canada, Brazil, India, and Russia.

The California economy generally mirrors that of the United States. In 2007–8, California, like the rest of the nation, has seen its overall economy decline. Because the housing market, a substantial part of California’s economy, has been more volatile in California than elsewhere, its economy’s negative trends—particularly in employment—have been more pronounced.

I don’t know how true that is today, but regardless the size of our state will have a major impact on the entire union. Hopefully, the Federal government realizes this and gives the state some much needed direction. At this point, Governor Arnold is having issues with the legislature passing the budget and the state controller Chiang executing his job duties. If our state doesn’t resolve its fiscal problems, then it will surely spill over to the rest of the country.