California Needs To Get Ready For An Economic Recession

California has frequently led the nation’s economic charge. The state is now hoping not to lead the way there as worries of a national recession gnaw at them.

While the California economy continues to be a powerhouse, surpassing even those of most nations, the state’s most powerful industries, such as tech firms and supply chain logistics, have struggled to maintain their footing. These industries have been hit hard by high interest rates, investor apprehension, labor unrest, and other unrest.

A recent tweet indicates about the recession in california:

The weather itself hasn’t been helpful. The Central Valley’s farming villages have been ravaged by severe floods over much of the winter, which was brought on by atmospheric rivers and cost hundreds of millions of dollars in crop losses.

The cost of living is skyrocketing, thousands of Californians have lost their jobs recently, and governor Gavin Newsom revealed in January that the state would run a $22.5 billion deficit in the 2023–24 fiscal year, a sharp decline from the $100 billion surplus the previous year.

At the time, Mr. Newsom compared a graph of the state’s revenue to the strong peaks and valleys of the heart’s electrical activity and said, “It’s an EKG.” “That encapsulates California’s tax system. It encapsulates the boom-bust.

The system, which is mostly based on taxing the richest Californians’ incomes, frequently results in drops when Silicon Valley and Wall Street are unhappy, as they are right now.

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Google’s parent firm, Alphabet, announced in January that it was laying off 12,000 employees globally. Silicon Valley Bank, a major lender to digital start-ups, also failed last month, prompting the federal government to scramble to contain the effect.

Due to increased risk aversion brought on by economic worries and rising interest rates, venture capital financing has decreased at the same time. The ability of Silicon Valley to produce jobs depends on that money, which decreased 36 percent internationally between 2021 and 2022, according to the management consulting company Bain & Company.

The backbone of the state’s economy, according to Sung Won Sohn, a finance and economics professor at Loyola Marymount University, is the tech sector. These are well-off people who might not be able to support the state as much as they once could.

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