California's economy is on edge after tech layoffs and studio cuts

As recession fears persist, problems in major industries have hurt tax revenues, turning the $100 billion surplus of the State in deficit.
California has often been at the economic forefront of the country. Now, as fears of a national recession continue to mount, the state is hoping not to lead the way.
As California's economy retains its powerhouse status, surpassing even those of most countries, the most powerful sectors of the state – including technology companies and supply chain logistics – have struggled to keep their footing, battered by the high interest rates, nervous investors, labor disputes and other unrest.
Even the weather didn't cooperate. Severe flooding through much of the winter, caused by atmospheric rivers, devastated farming communities in the Central Valley, causing hundreds of millions of dollars in crop losses.
Thousands of Californians have been laid off in the past few months, the cost of living is growing astronomically and Governor Gavin Newsom revealed in January that the state was facing a $22 deficit $.5 billion in fiscal year 2023-24 – a drop from the $100 billion surplus. a year ago.
"It's an ECG," Mr Newsom said at the time, comparing a graph of state revenue to spikes and to sharp falls in the electricity of the heart activity. “That sums up the California tax structure. That sums up the boom-bust."
The structure, which relies heavily on taxing the incomes of the wealthiest Californians, often results in declines when Silicon Valley and Wall Street are uneasy, as they are now.Alphabet, the parent company of Google, one of the state's largest companies, said in January it was cutting 12,000 workers around the world, and Silicon Valley Bank, a top lender to tech start-ups, collapsed last month, sending the federal government scrambling to limit the fallout.
This coincided with a decline in venture capital funding as rising interest rates and fears of recession led investors to become more risk averse. by 36% globally between 2021 and 2022, according to management consultancy Bain & Company, is critical to Silicon Valley's ability to create jobs.
“The technology sector is the workhorse of the state economy, it is the backbone,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University . "These are high earners who may not be able to support the state as much as they have in the past."
ImageGov. Gavin Newsom, center, said in January the state faced a $22.5 billion deficit in the 2023-24 fiscal year, after a $100 billion surplus a year ago. Credit...Lipo Ching/EPA, via Shutterstock
Entertainment, another mainstay of California's economy, has also shrunk as studios adjust to new habits of viewing. Burbank-based Disney announced in February that it would cut 7,000 jobs worldwide.
In California alone, employment in the information sector , a category that includes technology and entertainment workers, fell by more than 16,000 from November to February...

Technology Apr 11, 2023 0 51 Add to Reading List

California's economy is on edge after tech layoffs and studio cuts

As recession fears persist, problems in major industries have hurt tax revenues, turning the $100 billion surplus of the State in deficit.

California has often been at the economic forefront of the country. Now, as fears of a national recession continue to mount, the state is hoping not to lead the way.

As California's economy retains its powerhouse status, surpassing even those of most countries, the most powerful sectors of the state – including technology companies and supply chain logistics – have struggled to keep their footing, battered by the high interest rates, nervous investors, labor disputes and other unrest.

Even the weather didn't cooperate. Severe flooding through much of the winter, caused by atmospheric rivers, devastated farming communities in the Central Valley, causing hundreds of millions of dollars in crop losses.

Thousands of Californians have been laid off in the past few months, the cost of living is growing astronomically and Governor Gavin Newsom revealed in January that the state was facing a $22 deficit $.5 billion in fiscal year 2023-24 – a drop from the $100 billion surplus. a year ago.

"It's an ECG," Mr Newsom said at the time, comparing a graph of state revenue to spikes and to sharp falls in the electricity of the heart activity. “That sums up the California tax structure. That sums up the boom-bust."

The structure, which relies heavily on taxing the incomes of the wealthiest Californians, often results in declines when Silicon Valley and Wall Street are uneasy, as they are now.Alphabet, the parent company of Google, one of the state's largest companies, said in January it was cutting 12,000 workers around the world, and Silicon Valley Bank, a top lender to tech start-ups, collapsed last month, sending the federal government scrambling to limit the fallout.

This coincided with a decline in venture capital funding as rising interest rates and fears of recession led investors to become more risk averse. by 36% globally between 2021 and 2022, according to management consultancy Bain & Company, is critical to Silicon Valley's ability to create jobs.

“The technology sector is the workhorse of the state economy, it is the backbone,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University . "These are high earners who may not be able to support the state as much as they have in the past."

ImageGov. Gavin Newsom, center, said in January the state faced a $22.5 billion deficit in the 2023-24 fiscal year, after a $100 billion surplus a year ago. Credit...Lipo Ching/EPA, via Shutterstock

Entertainment, another mainstay of California's economy, has also shrunk as studios adjust to new habits of viewing. Burbank-based Disney announced in February that it would cut 7,000 jobs worldwide.

In California alone, employment in the information sector , a category that includes technology and entertainment workers, fell by more than 16,000 from November to February...