Monthly Jobs Report April 21, 2025
California's traditional jobs report suggests the state shed 12k jobs in March, and the prior month's report was revised down from -7k to -22k jobs. The state's traditional jobs report has shown a net job decline of 55k jobs over the past three months. In contrast, employment numbers from a secondary source, a household survey, have been somewhat more stable. Our hybrid measure that incorporates the household survey and has more closely tracked final jobs data suggests the state has lost 6k jobs over this period.
California Housing Affordability Tracker (1st Quarter 2025) April 21, 2025
Our post provides an updated snapshot of housing affordability in California. Over the last few years, we have seen a rapid increase in California housing costs, led by the dramatic increase in the costs of purchasing a home. Monthly costs for a newly purchased home are about $2,600 higher than they were just a few years ago, driven both by increases in home prices between 2020 and 2022 and an increase in mortgage rates since 2022.
The rapid increase in mortgage rates in 2022 has also left most existing homeowners "locked-in" to mortgages with rates significantly lower than currently available. More than 80 percent of California homeowners have mortgage rates under 5 percent, compared to current rates of about 7 percent. These homeowners face a significant additional financial cost to moving, further limiting the number of homes available for sale.
Inflation Tracker April 21, 2025
March data for the US show annual inflation was similar to pre-pandemic averages. This follows higher inflation readings in January and February, especially in California. Between December 2024 and February 2025, consumer prices grew at an annualized rate of 5.1% in California and 4.2% in the US. Recent surveys suggest that consumers expect significantly higher inflation over the next few years.
California New Car Registrations: February 2025 April 8, 2025
Starting with this post, we plan to publish monthly updates on new car registrations in California, which can be a useful, timely economic indicator. From December 2024 to February 2025, seasonally adjusted new car registrations declined by 8 percent. December registrations, however, had been the highest since mid-2022. As a result, February registrations still were around the average level over the last couple of years.
Income Tax Withholding Tracker April 7, 2025
Income tax withholding in March came in $163 million (2 percent) higher the recent projections included in the 2025-26 Governor's Budget. March withholding ran much closer to budget projections than January and February, which each exceeded budget projections by more than 10 percent. The recent trend in withholding appears to represent an uptick in growth compared to the generally strong period last summer. Recent withholding has been running about 10 percent higher than the prior year, whereas last summer was consistently in the 5 percent to 6 percent growth range.
Annual Revision to Monthly Jobs Survey Shows Far Fewer Job Gains in 2024 March 21, 2025
Each year, the U.S. Bureau of Labor Statistics revises the state's jobs numbers to match actual payroll records from businesses. The latest revisions updates the survey data through September 2024 and lowered California job gains from 260k to 60k over the year. The corrected data show the state's labor market grew just 0.3 percent between September 2023 and September 2024, while the preliminary monthly reports had showed the labor market roughly in line with the rest of the country (about 1.5 percent) over that period.
Cannabis Tax Revenue Update (2024 Q4) March 6, 2025
Our new cannabis tax revenue estimates are very similar to the revenues anticipated by the Governor's Budget.
Firearms and Ammunition Revenue Update February 21, 2025
In the first half of 2024-25, preliminary revenue for the firearms and ammunition excise tax was $29 million.
Updated "Big Three" Revenue Outlook February 20, 2025
Upside to Governor's Budget Revenues. Driven by the stock market, recent income tax collections have been decidedly strong. Reflecting this trend, our revenue outlook continues to improve and now suggests there is upside potential relative to the revenues assumed in the Governor’s Budget. Whether or not the stock market surge underpinning these revenue gains is sustainable is impossible to say, but several hallmarks of prior unsustainable stock market booms appear present today.
Five Guidelines for Using Revenue Forecasts February 20, 2025
As part of building the state budget each year, the Legislature and Governor must make an assumption about how much revenue the state will collect. Because no one knows how much revenue the state will collect next year, leaders must rely on revenue forecasts. Both our office and the Department of Finance (DOF) provide periodic revenue forecasts that can be used for this purpose. These forecasts use the best available data to provide informed estimates of future revenue collections. Although they have limitations, they are important to the state budget process because they offer an objective foundation on which the budget can be built. In this post, we offer guidelines to help make the best use of these revenue forecasts—that is, to help them focus on the right questions, avoid overreactions, and be better positioned for the unexpected.
The 2025-26 Budget: Single Sales Factor for Financial Institutions February 13, 2025
Under current law, most multistate and multinational corporations are required to calculate their California tax liability based on the share of their nationwide sales attributable to California (known as the single sales factor). However, businesses in specific industries have an exemption allowing them to use a three-factor method that equally weights their property, payroll, and sales in California. The Governor's budget proposes to remove this exemption for financial institutions. Our assessment is that there is no clear justification for financial institutions to have an exemption from the single sales factor, either from a fair apportionment or tax incentive perspective. Therefore, our recommendation is that the Legislature approve the Governor's proposal. We also note that although this change may increase state revenues, there is limited support for the notion that a shift to single sales factor apportionment will have significant economic development effects.
The 2025-26 Budget: Partial Income Tax Exclusion for Military Retirement Income February 13, 2025
The Governor proposes to exclude from state income taxation up to $20,000 in annual military retirement benefits. The exclusion would be available to individuals with income below $125,000 ($250,000 for joint taxpayers.) Our assessment is that the economic and fiscal rationale for this proposal is weak. Nonetheless, we recognize that other factors often are relevant to the Legislature’s decisions. In assessing the administration’s proposal, the Legislature will need to decide if these other factors are enough to support this tax change. If the Legislature simply wants to provide limited tax relief to veterans, that might also improve veterans’ perceptions of the state, it could adopt the administration’s proposal. If the Legislature instead prefers that this tax expenditure have a clear economic or fiscal rationale, it could reject the administration’s proposal.
January 2025 Los Angeles Wildfires Impact on Local Property Tax Revenues February 10, 2025
The devastating Los Angeles County fires of January 2025 destroyed thousands of structures, causing significant damage and displacement. This post assesses the implications for property tax revenues. The county faces a $10 billion to $20 billion reduction in assessed property values, estimated to result in a $100 million to $200 million annual property tax revenue loss to affected local governments. The governor's executive order delays tax payments for 218,000 properties until April 2026. By themselves, we expect these delays will have minimal long-term fiscal impacts.
Data Revisions Shows Monthly Survey Again Overstating Job Growth December 16, 2024
Since mid-2022, the state's monthly jobs survey has tended to overestimate actual employment growth. The data revision from the first quarter of 2024 gave some hope that this pattern was correcting, but the newest incoming data show the monthly survey again overstating employment. Specifically, the most recent match to administrative records shows the survey overestimated job creation from March through June this year by roughly 150,000 jobs (preliminary survey gain of 68,000 relative to matched net loss of 78,000 jobs).
Cannabis Tax Revenue Update (2024 Q3) December 3, 2024
Our new forecast for 2024-25 cannabis tax revenue is $653 million, somewhat lower than the May Revision forecast of $695 million.