While California officials boast about the state’s ranking as the world’s fourth-largest economy, the statewide job market continues to be one of the nation’s weakest.
With $4.1 trillion in economic output in 2023, the California economy trails only the United States, China, and Germany, according to a recent announcement from the governor’s office, after edging out Japan.
“California isn’t just keeping pace with the world — we’re setting the pace,” Gov. Gavin Newsom said. “Our economy is thriving.”
Not thriving, however, is California’s job market, whose grim conditions were sketched out by the most recent seasonally adjusted job numbers released by the state Employment Development Department.
“California’s labor market performance can only be described as lackluster,” said Scott Anderson, chief economist for BMO Capital Markets. “Expect California’s job losses to accelerate and the unemployment rate to rise in the months ahead.”
Over the most recent 12 months ending in March, the total number of nonfarm payroll jobs in California grew by 0.3%.
That was a far weaker one-year performance than what the Golden State chalked up for all of 2024, when the statewide job market grew 1%. The calculations were derived by comparing the number of nonfarm payroll jobs in March to the prior year’s total.
Those numbers show that California ranks poorly among all 50 states.
Over the one-year period ending in March, the U.S. job market, measured by nonfarm payrolls, grew 1.2%, according to information posted by the federal Bureau of Labor Statistics. That is four times faster than California’s gain over the same period.
In the view of experts such as Steve Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy, California’s retreat to the back of the pack is plain to see.
“The California economy is losing jobs at a time when most states are adding jobs, which puts California at or near the bottom of all states,” Levy said. “California will remain at or near the bottom in terms of job growth in 2025 and 2026.”
He warned that uncertainties with President Donald Trump’s tariff and deportation policies won’t help.
One reason the state appears to be struggling compared to its peers is that California’s housing woes keep it from having a sufficient number of workers, said Christopher Thornberg, founding partner with Beacon Economics.
“The California economy is labor-force constrained,” Thornberg said. “Over the past five years, California has added 100,000 people to its labor force. Texas has added 1.7 million. There are no housing vacancies in California.”
The state’s strong economic growth is due in part to the tech industry and its remarkable productivity. Tech companies have the ability to increase output even at a time when they slow hiring or cut jobs.
As the tech industry pushes ahead, California’s job performance when ranked among the 50 other states has deteriorated drastically.
Since 2020, California’s job totals have increased by 1.8% – ranking it 38th in the nation for that metric. Over the one-year period ending in March, the state’s job growth of 0.3% was only good enough for a No. 42 ranking.
With a loss of 54,800 positions, California is only one of 16 states to lose jobs during the first three months of 2025, leading to a rank of 47.
The Golden State’s rivals – such as Texas, Florida, Idaho, Arizona, Tennessee, Washington State, North Carolina, and Colorado – are gaining jobs at a far greater pace.
During the one-year period ending in March, Idaho was the best-performing state for nonfarm payroll job growth. With an increase of 2.6%, it was more than eight times higher than California’s pace.
The Bay Area is playing a big role in weighing down California’s job market.
Normally one of the key engines for the state’s economy, the region has sputtered over the past year, partly due to layoffs in the tech sector as companies seek to streamline operations.
The Bay Area lost 26,100 jobs over the past 12 months, a 0.6% downturn. So far in 2025, the Bay Area has lost 19,700 jobs — more than one-third the jobs that California lost during the first three months of this year.
The Bay Area’s three major urban centers – the South Bay, East Bay and San Francisco-San Mateo region – all have lost jobs over the one-year period and during the first three months of 2025. Of the jobs lost, the San Francisco metro region was the most impacted.
“Silicon Valley is in a slump right now, and since tech is one of the state’s major drivers, it has put California into a slump as well,” said Russell Hancock, president of San Jose-based think tank Joint Venture Silicon Valley.
Here’s how the job markets fared over the most recent one-year period in the Bay Area’s three major urban centers:
— The San Francisco-San Mateo area lost 10,800 jobs, a decline of 0.9%.
— The East Bay lost 9,100 jobs, a decrease of 0.8%.
— The South Bay shed 7,000 jobs, down 0.6%.
Fresh challenges could further undermine California’s economy, warned experts such as Michael Bernick, an employment attorney with law firm Duane Morris and a former director of the state Employment Development Department.
California faces the possibility that years of hyperactive spending by government agencies linked to the COVID-19 outbreak of 2020 could screech to a halt.
“The job cuts (in California) reflect the new economics of state and local governments in 2025, whose hiring and spending sprees of the post-pandemic periods are coming to an end,” Bernick said. “In 2025, these public entities are facing budget deficits.”
Bernick warned that job cuts loom for government employees.
“Talk of a full-blown California recession can’t be far off,” Hancock said.