In Solvang, state controller says recession is coming to California
Economists are predicting a recession will probably occur in full within the next two years, according to California State Controller Betty Yee, who spoke at an Aug. 24 event in Solvang hosted by the Solvang Chamber of Commerce.
Some larger companies in California are already making decisions to delay hiring and delay business growth, Yee said.
“This, to me, is the first kind of potentially recessionary impacts,” she said.
Solvang’s 2022 State of the City address featured Yee as the keynote speaker. A statewide elected official and the chief fiscal officer of the state with the world’s fifth-largest economy, Yee chairs the state Franchise Tax Board and serves as a member of the California Public Employees’ Retirement System and the California State Teachers’ Retirement System boards. The two pension boards have a combined portfolio of more than $800 billion.
The National Bureau of Economic Research is the official authority on when the country is in a recession, and that group has not made such a declaration, as of Aug. 24. But Yee said she thinks a recession is already underway.
“We do believe that we are — if not already in a recession — will be in a recession, and the question is how deep and how long,” Yee said. “My prognosis is that it will not be a prolonged recession. … We also are going to see a gradual increase in the number of unemployment claims as has already been evidenced in the past weeks.”
Yee said the state of California is experiencing labor shortages across economic sectors, individual households are dealing with inflationary pressures and housing is severely impacted when interest rates rise.
The national economy, she said, “is a mixed bag.”
Yee said the state stimulus money and inflation relief payments will help Californians afford the “most basic of needs,” such as food, gas and rent.
“As we have all been working our hardest to recover from the COVID pandemic, we are seeing things we need to do to be sure we are uplifting our business community, we are looking to support our workers, we are looking at making sure we are funding our most essential services, so inflation is not being driven by the pursuit of additional consumer demand for things they want, but things they need,” Yee said.
Yee, a Democrat who was first elected to the state controller’s office in November 2014, said she has been through several recessions and economic downturns. Consumer spending and residential and commercial construction were often the key indicators of a downturn, but, she said, “those two things are not the reliables anymore.”
“Many communities have been devastated because we have had basically a state where we’ve had growing inequality,” she said.
Looking ahead, Yee said the state and federal governments are looking for ways to “rebuild with more equity and with the idea everyone has the ability to be in a better place economically.”
