• Jun 6, 2014

The Recession in California

How Did the Recession Affect California?

by Gabriela Schneider

From ordinary citizens all the way up to the state government, California was among the states that were hit hardest by the recession. Times have been tough, especially in the Central Valley where The Way West is set and where agricultural towns have had to deal with the double blow of the economic crash and then the drought. The town of Mendota lost its grocery store in 2012, and other small businesses failed all over the state. Trailer parks and homeless camps seemed to spring up everywhere. Even though the housing bubble is over, people still struggle to find affordable places to live, especially here in the Bay Area. While Silicon Valley is leading the recovery, many inland areas are being effectively left behind, and unemployment and home foreclosures are still serious problems.

Unemployment: California’s unemployment rate peaked in 2010 at 12.4%, the third highest among US states. Although it has improved since then, to 6.7% as of February 2015, it is still the fourth highest in the nation, and varies widely between different parts of the state. The current national average is 5.5% unemployment.

Budget deficit: Between 2008 and 2012, California’s government went through serious money troubles because the economic crash reduced tax revenues. Budget deficits in the billions of dollars led to a series of downgrades to California’s bond rating (the government’s credit score). While the legislature battled over the budget, the state put government employees on furlough, closed state parks, raised tuition in the UC system, and at one point even had to start issuing IOUs instead of checks.

Municipal bankruptcies: One particularly conspicuous consequence of the recession was that entire towns and cities sometimes ran out of money. Stockton, California received nationwide attention in 2012 when it became the largest U.S. city in history to file for bankruptcy—though it was famously surpassed in 2013 by Detroit.

Housing problems: The housing bubble and its collapse were both particularly large in California, which has had more home foreclosures than any other state. A dearth of affordable housing is an ongoing problem, although there are many factors involved in addition to the post-bubble economy.

Another side effect of the recession was that many real estate developers abandoned construction on planned and partially-built neighborhoods, leaving so-called “zombie subdivisions.” Many of these developments have residents living alongside empty lots and vacant houses.