Unfortunately, yes. California is among the states hardest hit economically by the coronavirus pandemic, and its economy is in free fall—until further notice.
Its strengths—as a hub for commerce, tourism, and education in the Pacific Rim—have become accountabilities during the pandemic.
California was the first state to order a lockdown to counter the coronavirus and has avoided the high infection and death rates suffered in the Northeast. But the devastating financial costs of the lockdown are mounting every day. The state currently has an estimated unemployment rate above 20 percent—far higher than the 14.7 percent national rate as similar to the projected rate for New York, where the virus has hit the hardest.
It is unsure how long unemployment claims will continue to outpour in the coming days, but with the latest reports indicating at least another month of social distancing, and possibly much longer, it is safe to say that far more than the 2.2 million claims of the Great Recession will be made this time - From New York Times Article Why the Global Recession Could Last a Long Time.
As people stop working and only travel to make purchases that are absolutely necessary, industries lose revenue and are forced to lay off more employees than ever. This cycle impacts the value of companies. The improbability affects stock values, and not only private establishments but also the public sector is affected. Sales tax revenue tumbles. Capital gains tax revenue plummets. Eventually, even property tax revenue could decline, and it is quite devastating.
The most challenged of all private companies are the small businesses. These companies lack the financial resiliency to endure a lengthy slowdown or shutdown of their business. They do not have the ranks of paid staff who are expert in submitting applications for grants, waivers, and subsidies. A faltering economy, as it is, will put an end to thousands of small businesses. While large companies will suffer, this economic crisis will also give them the opportunity to buy the assets of failed small companies at sale prices.
A way to assist small companies would be to hold off the local minimum wage ordinances that have already challenged the ability of small businesses to survive. Now, California state law puts the state’s minimum wage ahead of nearly every state.
Several other factors will make recovery difficult for California, but the big question that will determine how long the recession lasts is whether employers will quickly rehire workers once the virus recedes. Across the state, there is a rising sense that the pandemic will reshape its economy, with long-lasting pain. Some even say it will be a long time before employment levels bounce back.