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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

California Nightmarin': Unemployment Nearly Doubles

California -- already in danger of running out of money -- reported that its December unemployment rate hit 9.3 percent, up from 8.4 percent in November and waaay up from 5.9 percent in December 2007.

The state shed 78,200 jobs in December, excluding farm workers as the economy is getting hammered by the recession. If California were an independent nation, its Gross Domestic Product would place it among the world's top 10 countries.

California has one of the nation's highest foreclosure rates. It is now tied with Louisiana for the nation's lowest credit-rating. Moody's has warned it may cut the state's debt rating, making much-needed loans harder to get and more expensive.

At the same time, Gov. Arnold Schwarzenegger (R) has been chiding his legislature to plug the state's massive budget shortfalls, projected to be $15 billion this year and $25 billion next year.

The Governator has been using apocalyptic language in describing the state's dire financial state that The Ticker is certain comes from his movies and, quite frankly, that he just enjoys saying.

"If we don’t put aside our ideological differences and negotiate and solve this problem, we’re heading towards a financial Armageddon," Schwarzenegger said in December.

Schwarzenegger has been, critics say, bullying the legislature by using populist tactics.

Which means, The Ticker hopes, that he is thisclose to telling the people of California this. (At the 22-second mark.)

-- Frank Ahrens
The Ticker is Twittering!

By Frank Ahrens  |  January 23, 2009; 3:31 PM ET
Categories:  The Ticker  | Tags: California, Moody's, Schwarzenegger, unemployment  
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Comments

California regulated themselves to death, and the freebies to all the illegals and unrealistic state pension and union contracts probably didn't help things.

Your credit card has been snipped. Time to pay the piper.

Posted by: millionea7 | January 23, 2009 3:47 PM | Report abuse

Unemployment did not double.

Unemployment didn't "nearly double."

It rose 57%.

An alarming fact, no doubt, but not nearly as bad as your sensationalist headline would indicate.

Posted by: jonsolo11 | January 23, 2009 5:44 PM | Report abuse

Im not a huge Arnold fan but he obviously has shown he will cross party lines to get things done. Cant say the same about the legislature. Same old story, Repubs wont raise taxes one cent, Dems refuse to cut one service. As a California resident its frustrating that people point to Arnold as the cause when the legislature prefers vacations to work most of the time.

Posted by: hcwarden | January 23, 2009 6:30 PM | Report abuse

How did California's unemployment rate double? Sure it's up, but it's not double.

Posted by: bullfrog25 | January 23, 2009 8:06 PM | Report abuse

Actually, the unemployment figure probably understates that situation since it includes only those who can collect unemployment insurance and therefore excludes illegal aliens. California is known to have one of the largest numbers of illegal aliens so either they're losing jobs, too, or they're keeping jobs while Californians are losing their's.

Posted by: Ali4 | January 24, 2009 10:58 AM | Report abuse

I would like to suggest that there is a correlation between California’s increasing unemployment rate and the fact that this State has the largest concentration of Alt-A and Option ARMs mortgages and that these borrowers include a large number of small business owners.

Given the following facts:

1) California leads the nation in Option ARMs mortgages which are the most “toxic”. 80-90% of these borrowers paid the “minimum”. At “reset” they will experience “payment shock” and default.

2) Experts predict a 2nd “Tsunami” Wave of Foreclosures of these “Toxic” Mortgages beginning in 4th quarter 2008 through 2012. Credit Suisse and others offer evidence from their research.

3) Credit Suisse predict 8.1 million Foreclosures in next 4 years

4) NASE Survey http://advocacy.nase.org/research.asp provides evidence that small business owners fell for these “Toxic” mortgages in the millions. Btw, I was the author of the NASE national survey.

5) Small businesses employ between 1 to 10 employees

6) Small businesses are closing due to the Recession

Conclusion:

California’s spike in unemployment at this time may be due to the foreclosures on the “Toxic” Alt-A and Option ARMs mortgages held by small business owners whose businesses have closed and their employees are now jobless.

This trend will continue and intensify as we get into 2009. CBS “60 Minutes” devoted a segment to the 2nd Wave of Foreclosures on 12/14/08.

Samuel D. Bornstein
Professor of Accounting & Taxation
Kean University, School of Business, Union, NJ
Tel: (732) 493 - 4799
Email: bornsteinsong@aol.com

Posted by: bornsteinsong | January 24, 2009 11:14 PM | Report abuse

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