End of the Beginning - Part 6

We have yet more labor market indicators this morning, data suggesting that the California economy - while greatly depressed thanks to the coronavirus crisis - has bottomed out.

The official seasonally-adjusted unemployment rate for California in May was 16.3% (as opposed to 4.1% a year ago). In April, it was 16.4%. Yes, there is lots of noise at the state level and the unemployment figures are distorted by technical issues caused by the fact that the survey is collected in ways that the were not designed for the current situation. No, there is no conspiracy in the data collection. But there is little difference between April and May after the big increase when the lockdown went into effect in March. (California's latest unemployment rate is significantly higher than the 13.3% for the U.S. as a whole.)

Similarly, a separate survey of nonfarm payroll employment in the state shows employment of 15.1 million in May (as opposed to 17.4 million a year ago) and 15.0 million in April. Again, there is little difference between April and May after the big drop when the lockdown went into effect in March.

Much depends on the course of the virus and what further "stimulus" may come from the federal government. It appears, however, that the powers-that-be in California and elsewhere have decided to "reopen," even if caseloads and deaths rise. That political decision means that economic activity will pick up and, among other things, that revenue from such activity-based taxes as the sales tax will increase. As we have noted, the legislature and governor are currently in conflict over the state budget, but continued economic news that suggests a bottoming out tends to favor the hand of the legislature. We will see.

The latest state-level labor market data (as cited above) are at:
https://www.bls.gov/news.release/pdf/laus.pdf