Badly hit California economy aims to reverse virus ‘free fall’

31 May, 2020 12:00 AM printer

LOS ANGELES: Millions unemployed, world-famous tourist attractions closed, movie sets shuttered and a huge deficit looming: California has been among the states hardest hit by the pandemic economically.

Before the coronavirus struck, the Golden State had been growing at a faster pace than the rest of the country for an entire decade.

But when stay-at-home orders were announced in March, earlier than similar measures elsewhere across the nation, the economy -- heavily dependent on tourism, hospitality and entertainment -- took a sharp nosedive.

As businesses from shops and restaurants to amusement parks such as Disneyland closed, unemployment shot from negligible levels to 24 percent, well above the national rate of 15 percent and closer to the state's Great Depression peak.

Having paid out nearly $19 billion in unemployment benefits, with the assistance of federal loans, California now faces a $54 billion deficit.

That means cuts to school, social, health and infrastructure programs.

"COVID-19 has caused California and economies across the country to confront a steep and unprecedented economic crisis -- facing massive job losses and revenue shortfalls," Governor Gavin Newsom said two weeks ago.

Lockdown restrictions are now starting to ease, with some 70 percent of the state's $3 trillion economy allowed to resume operations under strict social distancing measures, according to the governor.

Still, business remains chronically low and may remain so as long as consumers lack confidence that the virus is under control, said Tom Steyer, the former presidential candidate who heads California's economy recovery commission.

"For this economy to work... people need to feel safe," he said in a radio interview.

"You're not going to go shopping if you don't think it's safe. You're not going to go to work if you don't think it's safe.

But experts believe the state's diverse economy -- the world's fifth-largest -- can still bounce back to lead the United States' recovery.