What's happened
Recent data shows Californians have less disposable income despite higher median incomes, due to high costs of housing, energy, and taxes. Job growth has slowed, especially in tech, prompting residents and businesses to leave. The state's economic performance is shrinking relative to the US overall.
What's behind the headline?
California's economic decline is driven by structural issues that are now becoming measurable. Despite its large GDP, the state's share of the US economy has shrunk from 14.5% to 13.8%, indicating a relative decline. High housing prices and energy costs are eroding disposable income, with Californians having 35% less after expenses than the national average. Job growth has lagged, with private sector jobs shrinking by 2.7% since 2020, contrasting with national growth of 4.3%. The tech industry, once a pillar of California's economy, is losing ground, with a 3.4% decline in tech jobs in 2024—the largest in the US. These trends are a direct result of policy choices that have made California less competitive, prompting an outflow of businesses and residents to other states. The ongoing decline in economic performance will likely continue unless policymakers address high taxes, expensive energy, and regulatory burdens. The state's economic future depends on reversing these trends, or it will face further erosion of its economic dominance.
How we got here
California has historically been an economic powerhouse, driven by its tech industry and high productivity. However, recent years have seen a decline in its share of the US economy, with a slowdown in job growth since 2020. Rising costs of living, including housing, energy, and taxes, have contributed to outflows of residents and businesses, especially in the tech sector. The COVID-19 pandemic has accelerated these trends, exposing vulnerabilities in the state's economic model.
Our analysis
The New York Post and NY Times provide contrasting perspectives on California's economic challenges. The NY Post emphasizes the decline in disposable income and job growth, highlighting that Californians are earning more on paper but have less after expenses, especially in housing and energy costs. It notes that California's share of the tech sector has fallen from nearly 20% to about 16%, with many entrepreneurs leaving to avoid higher taxes. The NY Times focuses on rising property taxes and their impact on homeowners, illustrating how local governments are raising revenue through higher property taxes due to increased home values and inflation. Both sources agree that high costs and policy decisions are driving economic decline, but the Post emphasizes the shrinking tech sector and outflow of businesses, while the Times highlights the burden of property taxes on residents.
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