Silicon Valley’s unemployment rate has jumped almost a full point since May, to 3.9%. It could reverse California’s epic seven-year economic boom, and could lead to a crash just as epic.
Breitbart News reported early in 2017 that the San Jose-Sunnyvale-Santa Clara Metropolitan Statistical Area, known as Silicon Valley, was rapidly losing job momentum after leading California’s recovery since 2010. But the stock market’s “Trump Bump” in anticipation of cutting capital gains taxes and ending Obamacare’s 3.8 percent capital gains surcharge caused a burst of venture capital deals, flooding the “Valley” with cash.
Real estate prices took off and service jobs soared, slashing Silicon Valley’s unemployment rate to a national-low 3 percent in May.
The extraordinary economic performance of Silicon Valley’s tech giants led California to 87 consecutive months of job growth, driving down the state’s unemployment rate from 12.2 percent in February 2010 to 4.7 percent in May.
Breitbart News reported that California Governor Jerry Brown trumpeted that the state’s 2017-2018 May Budget Revision forecast that California tax receipts were trending up by $7.37 billion over the next three years due to higher capital gains revenue, and he encouraged the ;egislature to increase spending on social programs.
Brown’s 64-page “Budget Revi” extolled the state’s bright economic future and the leadership his administration is demonstrating on environmental and social justice issues. But he also acknowledged that the state’s next recession could see an annual tax revenue collapse of up to $20 billion, due to the end of Silicon Valley’s capital gains cycle.
With the Obamacare repeal failing in the U.S. Senate, and passing tax cuts looking more improbable, the wheels seem to have come off Silicon Valley’s economy. In the last 3 months, unemployment rose by 0.6 percent in June; 0.2 percent in July; and 0.1 in August. It is now 3.9 percent, according to the state.
August saw a sharp private sector deterioration in Silicon Valley, with a net loss of 600 private sector jobs, despite job gains of 1,300 in transportation & utilities; 1,000 manufacturing; and 900 in information. Leisure and hospitality service employment was hit the hardest with 2,900 job losses. Without public sector gains of 3,200 for government and 1,600 for education and health services, Silicon Valley would have topped the 4 percent unemployment rate a year ago.
California, which enjoyed following Silicon Valley’s job growth on the upside, now seems to be following Silicon Valley down the drain. The state’s unemployment rate jumped to 5.1 percent in August, its first back-to-back unemployment increase in over 7 years.
Most states headed into a recession would be expected to cut spending and slash taxes to stimulate the economy. But Governor Brown and his Democrat allies in the California legislature have maximized budget spending and their job-killing gas tax increase starts in November.