On Friday, California’s State Employment Development Department announced that the state’s unemployment rate rose to 9.3% in December, up from 8.4% in November, reaching the highest rate in 15 years. Over a million Californians lost their jobs last year. (More than 1.7 million of California’s 37 million residents were unemployed in December, up from only 650,000 in the same month a year ago.) The state’s annual deficit is now $42 billion, caused by a dramatic drop in tax revenues. This trend will likely push the state’s deficit up to $50 billion later this year.
California is the bellwether of the nation. Last Thursday, the Labor Department announced that new jobless claims rose by 62,000 to 589,000 in the previous week, reaching a 25-year high and soundly beating economists’ consensus expectation of just 543,000 new claims. If this trend continues, it looks like the U.S. economy is on a path to losing four million payroll jobs in 2009.
Contributing to the unemployment problem, the construction of new single and multi-family homes dropped 15.5% in December to an annual pace of 550,000, the slowest pace since such records started back in 1959. Bernard Baumohl, the chief global economist at the Economic Outlook Group, said “Simply put, without a recovery in housing, this economy goes nowhere.”