No matter what politicians in Sacramento say, California's economic decline was apparent well before the Great Recession hit the nation and the state in 2007, a new analysis from City Journal illustrates. It is another glaring example of failed public policies driving businesses and jobs from the Golden State.
Using the National Establishment Time Series database, which tracks economic indicators such as job creation and migration, City Journal learned that from 2000-08 California suffered net job loss. Factors included more jobs lost to business closures than were created by new start-ups, less job creation from such historically strong employment regions as Los Angeles and San Francisco, lower wages for workers and disturbing numbers of California-based companies leaving the state.
Wendell Cox, the principal of Demographia, a public policy consultancy, wrote, "California's economy during the second half of that period [2000-08] was far less vibrant and diverse than it had been during the first. Well before the crisis struck, then, the Golden State was setting itself up for a big fall."
From 2000-08, California "suffered net job losses of 79,600 to the migration of businesses among states," Mr. Cox wrote. In that same time period, business closures eliminated 262,200 more jobs than new ventures created, and California "lost more than 270,000 jobs in industries with an average wage higher than the private-sector state average." Also, big companies, those with 500 or more employees, scaled back by nearly 450,000 jobs.
Perhaps most startling is the decline in job creation in the Los Angeles greater metropolitan area and the San Francisco Bay Area. From 1992-2000 the two regions combined created 1.1 million jobs but from 2000-2008 they generated only 70,000 jobs.
Steve Malanga, a senior fellow at the Manhattan Institute and senior editor of City Journal, aptly characterized the Golden State's demise when he wrote "California has transformed into a relentlessly antibusiness state."
What would help the state economy would be a series of targeted reforms starting by easing regulations — labor and environmental, in particular — tax relief for businesses, civil litigation reform and reasonable state budgets. Until some form of political sanity prevails in the Sacramento, California's decline will likely continue despite potential improvement in the national economic outlook.