Something weird happened in California in 2022: the y/y employment growth rate reached an all-time high while y/y disposable income growth declined to an all-time low. How did this happen with an +83% increase in Federal & State assistance paid to Californians from June 21 to June 23?
- During the 2020 lockdowns, Californians sharply reduced their personal consumption expenditures even as their disposable personal income increased from government assistance transfers. Fast forward to 2022 & we see personal consumption expenditures expanding by almost +10% – a phenomenon which is generally attributed to consumers in California catching up on deferred purchases with their covid savings.
- However, the record -2.2% y/y decline in California’s 2022 disposable personal income is notable – especially given a dramatic increase in government assistance over the last couple of years as outlined in the table below.
- This suggests to us substantial growth in the mix of lower-earning part-time workers in California who are now receiving government assistance.
- In conclusion, while personal consumption expenditures and job numbers appear robust in California, a closer look at underlying data suggests underlying problems in the workforce.