California Dreaming: What Happened in 2022?

Oct 17, 2023 | Macro Insights, No Bull Economics

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?

Commentary

  • 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.
California Economic Performance Graph
  • 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.       
California Department of Social Services Expenditures Chart

Source: BEA Interactive Data Application; Local Assistance Estimates

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