With holiday gift-giving in the rear window, ’tis the season for returns.
Shoppers will decide which items from their seasonal bounty they’ll cherish and keep, and which they’ll send back or exchange.
Economically speaking, California was gifted with some winning trend lines in 2025. But there were also numerous lumps of coal within the state’s business patterns that are better not seen again.
This is not just a Golden State malaise. National economics don’t look so hot either. And numerous unorthodox policies in the Trump administration’s first year have not paid off, so far.
As a sort of California year-in-review, let’s ponder 11 economic twists that don’t need to return in 2026.
1. Sluggish staffing: The economy is basically about job growth. And while California bosses added workers at a 79,400-a-year pace in the past year, that’s stingy. Think about the 254,000-a-year expansion in 2019-2024. That’s a 69% drop in the number of growth-minded bosses.
2. Growing joblessness: Less hiring meant it was tough to replace a lost job or find a new one. The statewide unemployment rate ran at 5.4% over the past year, up from 4.8% over the previous five years. Not an alarming level, but it’s the wrong direction.
3. Slowing opportunities: Look at who’s starting California operations with employees. There were 173,000 new-business applications of this type in the past year vs. a 188,000-a-year pace in the previous five years. That’s an 8% drop in one measurement of business dreams.
4. Shrinking pay hikes: Bosses no longer feel forced to pay up. The Employment Cost Index for Southern California and the Bay Area showed wage gains averaging 4.2% in the past year vs. 4.4% over the previous five years. Has it become an employer’s market?
5. Longer commutes: Employment growth, though modest, plus a back-to-the-office movement, crowds California roads. The Texas A&M traffic congestion calculations for six California markets show that 103 hours were wasted in traffic jams in 2024, up 4% from 2023 and 28% since 2019.
6. Reignited inflation: The cost of living is heating up again. The Consumer Price Index for four California metro areas showed inflation at a 3.4% average annual pace this year, up from 2.5% a year earlier. This is the highest rate since June 2024 and hurts doubly as pay raises shrink.
7. Unaffordable housing: This old story keeps folks renting. Just 30% of Californians could qualify to buy a starter home in the past year, according to a first-time buyer affordability index from the California Association of Realtors. How bad is that? Well, this metric averaged 38% during the previous five years.
8. Few homebuyers: Who can afford to buy? Attom sales stats suggest not too many people. California home sales averaged 27,000 monthly in the past year vs. 33,583 in the previous five years. That’s a 19% slide, not surprising considering the suffocating costs.
9. Less home construction: If it won’t sell, or is tough to rent, California developers say, “Why bother?” In the past year, 98,100 permits for residential units were filed statewide, compared with an average of 106,500 per year in the previous five years. That’s an 8% drop.
10. Skipping the mall: Consumers pinch pennies, at least at local stores. One government yardstick of California shopping showed a 3% growth rate over the past year vs. a 4.7% pace over the previous five years. It’s why your favorite retail center is filled with folks peddling services, not goods.
11. Skipping the trip: Tight wallets are bad for tourism. California’s tourist industry is expected to draw 272 million visitors this year. And while that’s up 1% in a year, it’s still 5% below the recent peak set in 2019. A weak job market keeps Americans at home, and trade wars don’t attract foreign tourists.
These are confusing times that can play with one’s economic viewpoint.
Ponder the Conference Board’s Consumer Confidence Index for the state. The measurement of California shopper psyche fell at a 15%-a-year average pace for all of 2025. Certainly, these are signals of anxiety.
But an unprecented December surge left this optimism yardstick at a five-year high as 2025 finished.
It’s a curious year-end gift that raises numerous questions: Is this a fleeting fancy or a statistical quirk – or a durable reversal that signals better times in 2026?
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com