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Sunday, October 24, 2010 1:25 PM

California Cut 37,000 Government Jobs in September; Much More to Come

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The LA Times reports Government job cuts ravage California

Weighed down by a struggling economy, government agencies in California shed 37,300 workers last month — more jobs than were lost in the private sector — as cities and counties made their biggest payroll cutbacks since at least 1990.

What's more, analysts see more job cuts ahead as California faces an estimated $10-billion shortfall in the state budget that the next governor must address. Cities and counties, meanwhile, are still struggling with tepid sales and property tax revenue.

Cities across the state have taken stringent measures to balance their budgets, said Eva Spiegel, a spokeswoman with the League of California Cities.

Oakland laid off 80 police officers and delayed pothole repairs. Fullerton laid off 14 police officers and three firefighters, cut library hours and closed restrooms at several parks. Oceanside laid off 28 police officers and three firefighters, closed a swimming pool and a recreation center and eliminated the city Bookmobile.

Overall, the state's unemployment rate remained stuck at 12.4%, one of the highest in the nation. The state lost a net 63,600 jobs in September. Local governments shed 32,400 jobs, according to the monthly report from the state Employment Development Department released Friday.

Taxable sales plummeted 18.5% in California from 2006 to 2009 and are expected to remain relatively flat this year, according to the National University System Institute for Policy Research in La Jolla.

The National League of Cities reported this month that cities across the country were making their sharpest cuts in at least a quarter of a century. Nearly 80% of city finance officers in a survey reported laying off staff, and 87% said their cities were worse off financially this year than last year.
Taxable Sales Down 18%

Those last two paragraphs are the key to understanding one of the things I have been saying, that there is no recovery in sales.

Every month, when retail sales numbers come out, I question them. Here is my article from October 15: Retail Sales Rise More Than Forecast; Once Again I Ask "Really?"
Retail sales may be at their best point in the year, but sales are certainly not within 3% of the all time high [as government data shows]. If they were, tax revenue collection would be exceeding all time highs given increases in sales taxes.

Sales Tax Collections Down 5.9% June 2010 vs. June 2008

In spite of numerous sales tax hikes, tax collections are still 5.9% lower than two years ago. Moreover, June of 2008 was not the pre-recession peak. November of 2007 was the pre-recession peak.

Bear in mind those statistics are as reported in Retail Sales Rise .4% from July - How Far to Pre-recession Levels? Where to from Here? reflective of the second quarter.

See link for several charts.

Unless consumers have gone on a tear in the third quarter (highly unlikely with renewed slowdown in housing as well as the recent Gallup survey above), these retail sales reports are simply not believable.

What's clear is the methodology is flawed. By how much is the question. The way to figure out how much is to factor in all sales tax hikes and compare state sales tax collections. I will take another look at that as time permits.
Expect More Cutbacks, Lots More

Just a few days ago I penned, Severe, Life-changing, and Consciousness-Altering State Budget Cuts Coming.

The LA Times article is but a start for what I envision. Moreover, it does not even begin to address the fact that California Pension Promises Exceed 550% of State Tax Revenue by 2012; A Look at Solutions.

Finally, it should be crystal clear that Los Angeles, Oakland, San Diego, and numerous other cities in California and nationwide are bankrupt, mostly over public union pension promises that cannot be met.

Here are a few posts:

The most galling thing in all of this is public unions across the country are demanding more tax hikes so they can receive benefits those in the private sector can only dream about.

Indeed, most of the police, fire, and teacher layoffs underway would not have to happen, if only the unions would accept cutbacks in pay and benefits. Instead, senior union members always vote to toss the junior members to the dogs, then have the gall to blame voters for not hiking taxes.

Mike "Mish" Shedlock
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