The state is recovering from 2020’s COVID-19 pandemic lockdowns, according to a new report, however, a Cal State University economist predicts a 30% chance for a recession.
The California Employment Development Department (EDD) found that 138,100 new jobs were created statewide in February, which is the most the Golden state has reported since July 2021. That’s compared to 678,000 jobs added nationwide.
“The report is great and very promising however there are certain worries out there to watch for,” said CSU-Stanislaus economics professor Gokce Soydemir. “The yield curve inverted and the yield curve appears to be a very accurate indicator of a recession. Usually, recessions follow about 16 to 17 months later.”
For the first time in three years, two and 10-year Treasury yields inverted last week, according to media reports.
Soydemir also is concerned that the growth of jobs will be short-lived due to multiple interest rate hikes scheduled for 2022 by the Federal Reserve.
“Some economists argue that it’s going to spook the markets and may bring the economy to a hard landing but it's conditional on so many things like the Ukraine-Russia conflict,” said Soydemir.
As previously reported in the New York Times, the Federal Reserve plans to fight inflation with six more interest rate increases after approving the first quarter basis point increase last month.
"The effect is going to depend on how fast and how high they raise interest rates because certainly one of the criticisms that were directed at the Federal Reserve after the great recession was that interest rates were increased very fast and to a rate that was very high for the market to respond without going into a recession," Soydemir said. "So, are we going to have the same situation here?"
The EDD also found that 87.2% of 2,758,900 non-farm jobs in California have been recovered since 2020.
"Trade, transportation, and utility employment grew the fastest followed by the retail sector, which employs the unskilled and was the most heavily hit by the pandemic," Soydemir added. "Retail is coming back very fast. People are starting to dine out more. If you go to the malls, it's more crowded. There's no more requirement to wear a mask although it's strongly recommended. So, all of that is contributing."