California Economy and Taxes

Income Tax Withholding Tracker July 5, 2024

June PIT withholding came in $607 million (7 percent) below projections included in the 2024-25 May Revision. June's weaker-than-projected withholding should be interpreted alongside May totals, which were $1.1 billion above projections. Taken together, May and June withholding came in 4 percent above budget projections. For the fiscal year overall, 2023-24 PIT withholding came in about 5 percent higher than the prior year. 

Monthly Jobs Report July 1, 2024

Preliminary reports suggest the state added 43,000 jobs in May. We interpret these figures with caution because recent reports have overstated the strength of the state's labor market in a few ways. First, recent reports have routinely overestimated job growth. Over the past 15 months, the preliminary report has been revised down by an average of 30,000 jobs each month. Secondly, the state's private-sector job market has fared notably worse than the topline monthly figures suggest, which have been bouyed by continued hiring in the public sector and publicly supported sectors. Beginning this month, we will report a hybrid real-time measure of the labor market (an average of the two main jobs surveys) that has more closely tracked actual job growth over the past year. 

California's Private-Sector Labor Market Showing Broad Weakness July 1, 2024

The state's modest job growth over the past two years is a tale of two labor markets. Hiring in public and publicly supported sectors has bouyed job losses in many of the state's high-paying private sectors. While job losses have hit California, nationally these private-sector industries are faring much better.   

U.S. Retail Sales Update: May 2024 June 18, 2024

U.S. retail sales have grown 0.4 percent over the last 3 months and 2.3 percent over the last 12 months. Over both periods, sales have grown more slowly than inflation. 

Newest Early Jobs Revision Shows No Net Job Growth During 2023 June 17, 2024

A newly released "early benchmark" of the official state jobs figures shows that payroll jobs declined by 32,000 from September 2023 through December 2023, whereas the official state tally showed growth of 117,000 jobs over that period. With the fourth quarter early revision, calendar year 2023 shows essentially no net job gains. 

Cannabis Tax Revenue Update May 31, 2024

Our new forecast for 2023-24 cannabis excise tax revenue is $649 million, slightly below the May Revision forecast of $665 million.

The 2024-25 Budget: Temporary Corporation Tax Increases May 17, 2024

The May Revision proposes to temporarily increase corporation tax revenues by limiting the use of business tax credits and net operating loss deductions. This post analyzes those proposals. We think the proposal to limit use of tax credits is worth serious consideration. On the other hand, the proposal to limit net operating loss deductions raises concerns. In response, we suggest the Legislature consider alternative ways to raise revenue should it wish to pursue revenue solutions.

Inflation Tracker May 17, 2024

April data suggests a modest reversal of the recent uptrend in inflation. However, inflation remains above the pre-pandemic norm. Prices in California largely have tracked with this national trend. 

Updated "Big Three" Revenue Outlook May 2, 2024

Revenues Likely to Fall Below Governor’s Budget Assumptions. Our forecast continues to suggest there is significant downside risk to state revenues relative to the Governor’s Budget. Specifically, our forecast is $19 billion below the Governor’s Budget across the 2022-23 to 2024-25 budget window. That being said, there is still significant uncertainty about how much revenue the state ultimately will collect. It is entirely possible that revenues could end up $8 billion higher or lower than our estimate for 2023-24 and $20 billion higher or lower for 2024-25.

California Housing Affordability Tracker (April 2024) April 30, 2024

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 $2,500 higher than they were just a few years ago. Annual income needed to qualify for a typical home is about $235,000—over 2 times higher than median household income (about $85,000). Further, the annual income needed to qualify for a more affordable "bottom-tier" home is over 50 percent higher than the median income. 

U.S. Retail Sales Update: March 2024 April 15, 2024

U.S. retail sales have grown 0.8 percent over the last 3 months and 4 percent over the last 12 months. Retail sales growth has outpaced inflation over the last 12 months, but not over the last 3 months.

U.S. Retail Sales Update: February 2024 March 14, 2024

U.S. retail sales have dropped 0.4 percent over the last 3 months and grown 1.5 percent over the last 12 months. The 12-month growth rate was below the rate of inflation. 

Annual Revision Shows State Added Few Jobs Last Year March 13, 2024

Each year, the U.S. Bureau of Labor Statistics revises the state's jobs number to match actual payroll records from businesses. The latest revision lowered its count of California jobs by 1.5 percent. The corrected data show that the state added just 50,000 jobs between September 2022 and September 2023, while preliminary monthly reports had showed the labor market growing by more than 300,000 jobs. 

The 2024-25 Budget: Property Tax Postponement Program February 29, 2024

The Governor proposes to use $7.5 million General Fund on a one-time basis to support the Property Tax Postponement (PTP) program. The PTP program has a structural deficit, very low participation, and relatively high administrative costs. We recommend the Legislature (1) direct the State Controller's Office to report at budget hearings to provide an update on the PTP program and (2) consider eliminating the program. 

Overview of State Bond Debt Service February 27, 2024

We summarize state bonds, the state's current debt levels, and its annual debt service payments. In inflation-adjusted terms, total bond debt and annual debt service payments have declined over the last couple of decades. The share of the overall state General Fund budget going to debt service payments is less than 3 percent--also the lowest level in over 20 years. We project that the share of the General Fund budget going to debt service payments will remain relatively steady over the next few years.