California: Is the Gloom Actually Lifting?

            In December of 2007, the United States declared that it was in a recession.  A recession, as defined by Samuelson and Nordhaus, is  “a period of significant decline in total output, income, and employment, usually lasting from six months to a year and marked by widespread contractions in many sectors of the economy” (2010, 672). Almost all Americans felt the impact of the recession, especially as the unemployment rate increased, Gross Domestic Product declined, the housing market collapsed, and many states created high deficits. Nevertheless, the US is slowly beginning to recover, with some states recovering at a faster rate than others.

            According to an article in the New York Times titled “California Finds Economic Gloom Starting to Lift,” Adam Nagourney articulates that California is beginning to see positive economic growth after being harshly affected by the recession. Even though California is ranked third in the nation for the highest jobless rate, it has seen significant improvement in its economy. For example, “California reported a 10.1 percent unemployment rate last month, down from 11.5 percent in October 2011 and the lowest since February 2009” (Nagourney, 2012). Moreover, California has seen the housing market bounce back, deficit decreases, and state confidence.

            Such economic recovery, however, has not been uniform. This has caused California to remain the state ranked with the highest poverty in the nation. With a poverty gap so high, how can California truly claim that it is experiencing an economic rebound? One means of rebutting the claims in this article is to look at the unemployment rate statistics. For example, Nagourney insinuates that California’s unemployment rate is much better today than it was a year ago. Yes, perhaps it did decrease by 1.4 percentage points; however, the percentage decrease was only 16.1 percent. This decrease is not very significant considering the overall decrease (10 percent in 2010 and 7.9 percent in 2012) in the unemployment rate in the US was 2.1 points and 21 percent (Bureau of Labor Statistics, 2012). California still does not have the overall unemployment rate decrease beat when its rate in 2010 (12.4 percent) is compared to the current rate (10.1 percent) - a 2.3 percentage point drop and an 18 percent decrease in the unemployment rate (Bureau of Labor Statistics, 2012). Moreover, some states, such as Florida have experienced a 2.9 percentage point drop (11.4 in 2010 and 8.5 in 2012) and a 25 percent decrease in its unemployment rate (Bureau of Labor Statistics, 2012). Thus, Florida has had a more significant decrease in the unemployment rate than what California has experienced thus far.

            Florida, therefore, has actual grounds to report a strong economic rebound. California, on the other hand, still has a lot of poverty problems to address- which can perhaps be improved by working on job creation and significantly decreasing the unemployment rate. But, such economic improvements cannot be made alone; it is going to take cooperation and determination from policy-makers from both political parties to allow for a state-wide and uniform economic rebound. Moreover, policy-makers will also need to address issues concerning structural, frictional, and cyclical unemployment as all types have been experienced by Americans since the recession hit in 2007. Even though this is a difficult goal to satisfy, policy-makers must aim high if the US is to ever fully recover. 

References:

Article link: http://www.nytimes.com/2012/11/28/us/california-shows-signs-of-resurgence.html?_r=0&pagewanted=print

Bureau of Labor Statistics. 2012. “Current Unemployment Rates for States and Historical Highs/Lows.” United States Department of Labor. Retrieved from: http://www.bls.gov/web/laus/lauhsthl.htm.

Samuelson, P. & Nordhaus, W. 2010. “Economics 19e.”McGraw-Hill: NY.