Inflation threatens California’s economic recovery

California’s economic rebound from the pandemic’s destruction has been better than originally predicted — but surging inflation threatens to wipe out the State’s hard-won achievements.

These were the key takeaways from a Friday report from the state Employment Development Department, which pegged California’s January unemployment rate at 5.8 percent — the same level as December when the rate was revised down from 6.5 percent to 5.8 percent due to revised data showing significant job gains that month. Additional major takeaways include the following:

California increased job growth by 7.4 percent between January 2021 and January 2022, compared to 4.6 percent nationally.

More than anticipated, the State has recovered around 82 percent of the almost 2.8 million jobs lost during the first two months of the epidemic.

Gov. Gavin Newsom, who touted California’s economic prowess in his State of the State address last week, claimed the study demonstrated the effectiveness of the State’s COVID-19 regulations.

Must read: Campus mask mandate ends in April

“Our strategy has been to follow science while assisting people most impacted by the epidemic, and it has not only saved tens of thousands of lives — it has also returned our state to work sooner and better than the rest of the country,” Newsom said.

However, there is still more work to be done: California equaled Nevada for the highest unemployment rate in the country in December, the most recent month for which government data are available.

According to Michael Bernick, a former EDD director and attorney at Duane Morris, the Golden State’s civilian labor force is still 452,000 employees short of pre-pandemic levels.

Furthermore, inflation increased 7.9 percent countrywide for the year ending in February, the US Bureau of Labor Statistics announced this week – the highest pace in 40 years.

“Inflation has already eroded wage increases in California, particularly for lower-income employees, and threatens to impede growth considerably,” Bernick said.

Inflationary pressures, along with Russia’s conflict on Ukraine, have contributed to skyrocketing gas prices: According to the American Automobile Association, the average price of a normal gallon in California was $5.74 on Sunday, up from $5.29 a week earlier.

Today, Republican state lawmakers are set to force a vote on a plan that would temporarily erase California’s 51-cent gas excise tax — one of several proposals Newsom and legislators have made to aid families struggling at the pump.

Another bill, presented Friday by Santa Monica Democratic state Sen. Ben Allen, would force oil refiners to report their profit margins on each barrel of gasoline sold.

However, fiddling with the gas tax looks to be becoming more unpalatable politically for California’s Democratic-majority Legislature. “We need to abandon the gas tax and focus on other sorts of tax relief or other forms of support for working people,” San Francisco state Sen. Scott Wiener, a Democrat, told the Los Angeles Times.

Nonetheless, experts fear that refunds— akin to the Golden State stimulus cheques handed to millions of California residents last year — could exacerbate runaway inflation.

“Our economy is at an all-time high,” Republican political consultant Rob Stutzman told the Sacramento Bee. “Does it make sense to reinvest the money?”