Thursday, July 2, 2009

California in 'fiscal emergency'

The governor of California has declared a fiscal emergency in the US state to address a budget deficit of some $24.3bn (£14.5bn).

Governor Arnold Schwarzenegger also ordered many state offices to close for three days each month until June 2010, with staff unpaid for those days.

California has been one of the US states hardest hit by the recession.

The moves comes after state legislators missed a 1 July deadline to approve a budget for the coming financial year.

State Controller John Chiang has said the failure to meet the deadline means the state deficit will increase by up to $6.5bn by September.

Mr Chiang told the BBC that many vulnerable people had been put in harm's way by the state's failure to agree the budget and to provide "essential dollars to help these people pay their rent, to put food on the table or to pay their utility bill".

He had earlier warned that drastic measures would have to be taken to conserve cash, including delaying payments to companies working for the state and to those relying on benefits and grants.

Under the emergency measures, some state offices will be closed on the first, second and third Friday of every month until June 2010, with staff not paid for those days.

Mr Schwarzenegger said in a statement that although the legislature had failed to remedy the budget problems, "solving the entire deficit" remained his "first and only priority".

"I will not rest until we get it done. I will not be a part of pushing this crisis down the road - the road stops here," he said.

The White House said it was closely monitoring the situation in the state.

'Still proud'

On Tuesday, the Californian Senate failed to agree on Democratic proposals to shave $3.3bn from education and other programmes as a stopgap measure to address the shortfall.

Democrats believe cuts should not slash vital social programmes while Republicans argued that much deeper spending cuts were needed to balance the budget.

Republicans and Mr Schwarzenegger have also ruled out tax increases.

California struggles to balance its budget every year, but this year has been particularly difficult.

And the size of the Californian economy - it is the world's eighth largest economy and generates nearly 13% of US gross domestic product - means what happens there matters for the rest of the country.

But Mr Schwarzenegger said that despite the crisis, he was proud of California, saying 30 more states were also yet to agree a budget.

For many states, 30 June heralded the end of the fiscal year, but several were facing crucial decisions to balance the books as the deadline neared.

Many of the states are legally required to have a balanced budget, which can mean cutting services and firing workers.


Today's California visionaries are calling for a constitutional convention to rewrite the plainly dysfunctional rules by which the state governs itself. It is not only Californians but also America that has a stake in their success. A California that decimates itself during recessions drags the rest of the nation down with it.
Harold Meyerson, writing in the Washington Post, says California

Democrats and the governor, and the Republican lawmakers who take pride in never voting in favour of any budget, have set us on a road toward two possible cataclysms: a popular revolt that will further diminish the power of government as we know it, and ruinous default that keeps the recession alive for another decade and plunges Californians, and perhaps all Americans, into nearly unimaginable misery. Sacramento players should check their rear view mirrors. Both objects are closer than they appear.
A Los Angeles Times editorial also warns that financial collapse in California

Why is this happening to California? The worst economic downturn in 60 years is playing a big role. But so is the US Senate's moronic decision to cut nearly $100 billion in state stabilization funds from the stimulus earlier this year. That money would have gone to states like Illinois and California, helping keep schools open, keep kids on health care, and prevent budget cuts from strangling economic recovery.
Blogger Eugene, writing in the Daily Kos, says Republicans are

Both the social and physical infrastructure of California is deficient and continues to degrade. It is no exaggeration to say that the health, welfare and safety of our society are endangered. "California has become ungovernable" has evolved from an observation to a cliche... The state now stares into a $24.3 billion budget hole. As the governor and the legislature play more political games, California faces the possibility of literally going broke.
On SDNN, Chris Crotty and Tom Murray say the budget crisis has

Story from BBC NEWS:

Published: 2009/07/02 11:20:35 GMT

US job losses worse than expected

The number of jobs lost in the US last month came in at 467,000, which was much more than had been expected.

The jobless rate rose to 9.5% in June, from 9.4% in May, as the US economy continued to struggle.

Since the start of the recession in December 2007, the number of jobless people has risen by 7.2 million, the Department of Labor said.

The unemployment rate was slightly lower than had been expected, but was still the highest since August 1983.

The number of people losing their jobs can be higher than expected at the same time as the jobless rate is lower than expected, because they are measured in different ways.

The former is a measure of how many people are working, while the latter shows the number of people looking for work.

Not everybody who has lost a job will be looking for another one.

'Terrible' market

The non-farm payrolls number would usually be released on a Friday, but has been announced a day early because US markets will be closed on Friday.

The latest set of figures also included revisions to data for the two previous months, with the number of jobs lost in April rising 15,000 to 519,000 and the number lost in May falling 23,000 to 322,000.

Average hourly earnings were unchanged at $18.53 (£11.33).

A total of 14.7 million people were unemployed in June, the figures showed.

The job losses come despite recent signs of optimism from surveys.

"The job market is terrible. It's as bad as we've seen in our lifetime," said Keith Hembre, chief economist at FAF Advisors in Minneapolis.

"The light at the end of tunnel is that we see some stability in domestic demand and some demand overseas."

'Longer process'

In its separate weekly jobs report, the Department of Labor said that the number of newly laid-off workers applying for employment benefits last week fell to 614,000, while the number of people continuing to claim benefits unexpectedly fell to 6.7 million.

The average working week for production and non-supervisory workers fell 0.1 hour to 33.0 hours, which was the lowest since records began in 1964, suggesting that more people are working part-time.

The average working week for manufacturers rose 0.1 hour to 39.5 hours.

"I don't think it means that the story that the economy is bottoming out is wrong, I still think that is the right story," said Nigel Gault, chief US economist at IHS Global Insight.

"But it's evident that it's going to be a much longer process to bottom out in the labour market than it is to bottom out in the auto market or industrial production or GDP."

Story from BBC NEWS:

Published: 2009/07/02 13:36:06 GMT