Report paints dismal picture of California’s jobs market

By Chris Woodward
The Center Square

New research shows California is the Not-So-Golden State when it comes to jobs.

Pacific Research Institute, a Pasadena-based, nonpartisan free market think tank, went as far back as March 2001 to examine past business cycles and how California’s employment market and overall economy stack up against other states. The results are in PRI’s new report “California at a Crossroads: How Bad Policy Cost California Its Economic Edge – and How to Win It Back.” Authors are Wayne Winegarden, a senior fellow in business and economics for PRI, and Kerry Jackson, a journalist, opinion writer and fellow at PRI’s Center for California Reform.

Winegarden said California’s employment market was outpacing the country after the financial crisis of 2007. However, that has changed in recent years.

“What we’re seeing now – since February 2020, the current cycle – the overall non-farm employment growth in California is less than half the growth of jobs that we’ve seen nationally,” Winegarden told The Center Square during an exclusive interview. “In fact, if you start breaking that down and look at the private sector, it’s even slower relative to the nation.”

Outside of health care jobs, California’s private sector employment is shrinking, said Winegarden, who’s also director of PRI’s Center for Medical Economics and Innovation.

“This is relative to kind of our last peak,” said Winegarden. “Where you’ve seen growth nationally, you’re seeing a decline in California.”

Pointing to fiscal and regulatory policies impacting things such as taxes and energy prices, Winegarden said the state is “basically disincentivizing growth and discouraging people from wanting to live in the state.”

California Gov. Gavin Newsom has stated on numerous occasions that his state is doing well in terms of job creation. During his 2026 State of the State address, Newsom said, “No state builds more ladders to success or sees around more corners.” The Democratic governor, who will be termed out in early January 2027 and is widely expected to run for president in 2028, also spoke highly of state sectors such as manufacturing and agriculture.

“The biggest manufacturing economy is constructed here, the most productive agricultural economy is grown here,” said Newsom in January 2026. “Eighteen percent of the world’s R&D: invested here. Half of our nation’s unicorns — $1 billion startups: headquartered here. The happiest cities in America: right here. Fremont, San Jose, Irvine, San Francisco and San Diego”

Newsom made similar comments in February while at a “Jobs Jobs Jobs” tour that included stops in Orange and Kern counties.

“We have no peers,” said Newsom around 20 minutes into the live-streamed event.

Winegarden had a word for this: “Spin.”

In his report, Winegarden wrote that, at its peak in 2021, California accounted for 14.5% of the national economy. That is no longer the case, he said. In fact, Winegarden wrote California is not the country’s economic leader of the 2020s.

California’s dominance in technology jobs is lessening. There was a 0% change in tech jobs in 2023 compared to states such as Texas reporting 2.8% growth and Florida right behind with 2.7% growth. In 2024, California saw a 3.4% decline in tech jobs while the Lone Star and Sunshine states experienced slight upticks.

Winegarden also noted California has seen a “relative manufacturing decline that began in earnest in 2010.” For every 10,000 residents in the state, Winegarden found there are only 334 manufacturing jobs, which pales in comparison to the top five states – Wisconsin (789), Indiana (758), Iowa (698), Kansas (601) and Michigan (599).

“Less-regulated, lower-tax states such as Kentucky (575), Alabama (558), Arkansas (530), Nebraska (530), Tennessee (509), South Carolina (491), Mississippi (488), and South Dakota (487) all have better per capita factory jobs numbers,” wrote Winegarden in PRI’s report.

These things also have negative impacts on small businesses built around big companies. Winegarden called this “disconcerting” because small businesses are the backbone of the economy and play an essential economic role.”

Meanwhile, businesses of all sizes need people, and Winegarden said people have been moving out of California for years.

“Californians are choosing to live elsewhere,” he said.

Among the metropolitan areas, Los Angeles County’s loss of 53,394 people between July 2024 and July 2025 was the largest in the country. Orange, San Diego and Ventura counties were also among the top 10 metro areas that lost the most people.

Winegarden added that “what’s really disconcerting” is that the artificial intelligence industry is headquartered in the San Francisco Bay Area, yet technology jobs are growing less in this region.

“We have these assets, and yet while we have these really important assets, we’re still not generating the jobs, and we’re not generating the growth you would expect,” said Winegarden. “So the fact that AI is centered here, and yet our job performance is worse than the national average, and the organization overall, that is really, really an indictment of what’s happening here.”

Americans living in other states may see a story about California and dismiss it thinking it does not impact them, but Winegarden said that would be a mistake. Connecticut, for example, needs California to be successful and growing just as California needs Connecticut to be successful and growing, he said.

“We are one national economy,” Winegarden said, noting Americans do better when growth is solid across the country.

“When California doesn’t do as well, that dampens growth across the country, and when California does better, other states do better, and it works in reverse too,” said Winegarden. “We’re one economy, and we really need to be rooting for one another, not constantly tearing each other down.”

Winegarden said California’s problems can be remedied. He recommended lawmakers “rethink and reform” fiscal and regulatory policies.

For example, legislators should “aim to reduce the total per capita state tax collections closer to the national average of $4,329,” Winegarden said.

At the same time, lawmakers should practice “greater fiscal discipline on the state’s spending,” he said.

As for deregulation efforts, Winegarden said those should start with reforming the California Environmental Quality Act. According to the economist, “CEQA is preventing the construction of needed roads, bridges, rails, and water and telecom infrastructure,” while also obstructing the construction of schools and hospitals, and stalling efforts to do things like increasing wildfire resilience.

“Reforms should limit the ability of groups to use CEQA as a cudgel to obstruct any development and impose stringent transparency requirements on CEQA litigation funding,” wrote Winegarden. “To further alleviate the excessive cost of housing, restrictive state and local regulations need to be relaxed, including land-use and zoning regulations.”

Winegarden said eliminating rent controls will remove “a major disincentive that obstructs the construction and development of rental units.”

By removing disincentives to build more housing, Winegarden said, California will not only promote greater housing affordability, but it will also significantly upgrade the quality of housing for many Californians.