For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “We Are Colliding With A Future of Extremes”
CLIMATE CHALLENGES
- Texas Blackouts Warn the Nation: “A Future of Extremes” Threatens Power & Water Infrastructure Now
- California Will Whiff on Climate Emissions Goals, 2 Reports Say
- Legislature Ponders Offshore Wind Power Plan by 2022
ECONOMIC RECOVERY
- Cities Issuing Questionable Securities: “It Boggles My Mind”
- California Contra-Indications: Record Dip in Employment; Tax Revenues Top Forecast
- US Job Market Strengthens
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
READ ALL ABOUT IT!!
FOR THE WEEK ENDING FEB. 26, 2021
Texas Blackouts Warn the Nation:
“A Future of Extremes” Threatens Power & Water Infrastructure Now
New York Times
Even as Texas struggled to restore electricity and water over the past week, signs of the risks posed by increasingly extreme weather to America’s aging infrastructure were cropping up across the country.
The week’s continent-spanning winter storms triggered blackouts in Texas, Oklahoma, Mississippi and several other states. One-third of oil production in the nation was halted. Drinking-water systems in Ohio were knocked offline. Road networks nationwide were paralyzed and vaccination efforts in 20 states were disrupted.
The crisis carries a profound warning. As climate change brings more frequent and intense storms, floods, heat waves, wildfires and other extreme events, it is placing growing stress on the foundations of the country’s economy: Its network of roads and railways, drinking-water systems, power plants, electrical grids, industrial waste sites and even homes. Failures in just one sector can set off a domino effect of breakdowns in hard-to-predict ways.
Much of this infrastructure was built decades ago, under the expectation that the environment around it would remain stable, or at least fluctuate within predictable bounds. Now climate change is upending that assumption.
“We are colliding with a future of extremes,” said Alice Hill, who oversaw planning for climate risks on the National Security Council during the Obama administration. “We base all our choices about risk management on what’s occurred in the past, and that is no longer a safe guide.”
While it’s not always possible to say precisely how global warming influenced any one particular storm, scientists said, an overall rise in extreme weather creates sweeping new risks.
Sewer systems are overflowing more often as powerful rainstorms exceed their design capacity. Coastal homes and highways are collapsing as intensified runoff erodes cliffs. Coal ash, the toxic residue produced by coal-burning plants, is spilling into rivers as floods overwhelm barriers meant to hold it back. Homes once beyond the reach of wildfires are burning in blazes they were never designed to withstand.
Problems like these often reflect an inclination of governments to spend as little money as possible, said Shalini Vajjhala, a former Obama administration official who now advises cities on meeting climate threats. She said it’s hard to persuade taxpayers to spend extra money to guard against disasters that seem unlikely.
But climate change flips that logic, making inaction far costlier. “The argument I would make is, we can’t afford not to, because we’re absorbing the costs” later, Ms. Vajjhala said, after disasters strike. “We’re spending poorly.”
The Biden administration has talked extensively about climate change, particularly the need to reduce greenhouse gas emissions and create jobs in renewable energy. But it has spent less time discussing how to manage the growing effects of climate change, facing criticism from experts for not appointing more people who focus on climate resilience.
“I am extremely concerned by the lack of emergency-management expertise reflected in Biden’s climate team,” said Samantha Montano, an assistant professor at the Massachusetts Maritime Academy who focuses on disaster policy. “There’s an urgency here that still is not being reflected.”
In September, when a sudden storm dumped a record of more than two inches of water on Washington in less than 75 minutes, the result wasn’t just widespread flooding, but also raw sewage rushing into hundreds of homes.
Washington, like many other cities in the Northeast and Midwest, relies on what’s called a combined sewer overflow system: If a downpour overwhelms storm drains along the street, they are built to overflow into the pipes that carry raw sewage. But if there’s too much pressure, sewage can be pushed backward, into people’s homes — where the forces can send it erupting from toilets and shower drains.
This is what happened in Washington. The city’s system was built in the late 1800s. Now, climate change is straining an already outdated design.
DC Water, the local utility, is spending billions of dollars so that the system can hold more sewage. “We’re sort of in uncharted territory,” said Vincent Morris, a utility spokesman.
The challenge of managing and taming the nation’s water supplies — whether in streets and homes, or in vast rivers and watersheds — is growing increasingly complex as storms intensify. Last May, rain-swollen flooding breached two dams in Central Michigan, forcing thousands of residents to flee their homes and threatening a chemical complex and toxic waste cleanup site. Experts warned it was unlikely to be the last such failure.
Many of the country’s 90,000 dams were built decades ago and were already in dire need of repairs. Now climate change poses an additional threat, bringing heavier downpours to parts of the country and raising the odds that some dams could be overwhelmed by more water than they were designed to handle. One recent study found that most of California’s biggest dams were at increased risk of failure as global warming advances.
In recent years, dam-safety officials have begun grappling with the dangers. Colorado, for instance, now requires dam builders to take into account the risk of increased atmospheric moisture driven by climate change as they plan for worst-case flooding scenarios.
But nationwide, there remains a backlog of thousands of older dams that still need to be rehabilitated or upgraded. The price tag could ultimately stretch to more than $70 billion.
“Whenever we study dam failures, we often find there was a lot of complacency beforehand,” said Bill McCormick, president of the Association of State Dam Safety Officials. But given that failures can have catastrophic consequences, “we really can’t afford to be complacent.”
If the Texas blackouts exposed one state’s poor planning, they also provide a warning for the nation: Climate change threatens virtually every aspect of electricity grids that aren’t always designed to handle increasingly severe weather. The vulnerabilities show up in power lines, natural-gas plants, nuclear reactors and myriad other systems.
Higher storm surges can knock out coastal power infrastructure. Deeper droughts can reduce water supplies for hydroelectric dams. Severe heat waves can reduce the efficiency of fossil-fuel generators, transmission lines and even solar panels at precisely the moment that demand soars because everyone cranks up their air-conditioners.
Climate hazards can also combine in new and unforeseen ways.
In California recently, Pacific Gas & Electric has had to shut off electricity to thousands of people during exceptionally dangerous fire seasons. The reason: Downed power lines can spark huge wildfires in dry vegetation. Then, during a record-hot August last year, several of the state’s natural gas plants malfunctioned in the heat, just as demand was spiking, contributing to blackouts.
“We have to get better at understanding these compound impacts,” said Michael Craig, an expert in energy systems at the University of Michigan who recently led a study looking at how rising summer temperatures in Texas could strain the grid in unexpected ways. “It’s an incredibly complex problem to plan for.”
The collapse of a portion of California’s Highway 1 into the Pacific Ocean after heavy rains last month was a reminder of the fragility of the nation’s roads.
Several climate-related risks appeared to have converged to heighten the danger. Rising seas and higher storm surges have intensified coastal erosion, while more extreme bouts of precipitation have increased the landslide risk.
Add to that the effects of devastating wildfires, which can damage the vegetation holding hillside soil in place, and “things that wouldn’t have slid without the wildfires, start sliding,” said Jennifer M. Jacobs, a professor of civil and environmental engineering at the University of New Hampshire. “I think we’re going to see more of that.”
The United States depends on highways, railroads and bridges as economic arteries for commerce, travel and simply getting to work. But many of the country’s most important links face mounting climate threats. More than 60,000 miles of roads and bridges in coastal floodplains are already vulnerable to extreme storms and hurricanes, government estimates show. And inland flooding could also threaten at least 2,500 bridges across the country by 2050, a federal climate report warned in 2018.
Sometimes even small changes can trigger catastrophic failures. Engineers modeling the collapse of bridges over Escambia Bay in Florida during Hurricane Ivan in 2004 found that the extra three inches of sea-level rise since the bridge was built in 1968 very likely contributed to the collapse, because of the added height of the storm surge and force of the waves.
“A lot of our infrastructure systems have a tipping point. And when you hit the tipping point, that’s when a failure occurs,” Dr. Jacobs said. “And the tipping point could be an inch.”
Crucial rail networks are at risk, too. In 2017, Amtrak consultants found that along parts of the Northeast corridor, which runs from Boston to Washington and carries 12 million people a year, flooding and storm surge could erode the track bed, disable the signals and eventually put the tracks underwater.
And there is no easy fix. Elevating the tracks would require also raising bridges, electrical wires and lots of other infrastructure, and moving them would mean buying new land in a densely packed part of the country. So the report recommended flood barriers, costing $24 million per mile, that must be moved into place whenever floods threaten.
A series of explosions at a flood-damaged chemical plant outside Houston after Hurricane Harvey in 2017 highlighted a danger lurking in a world beset by increasingly extreme weather.
The blasts at the plant came after flooding knocked out the site’s electrical supply, shutting down refrigeration systems that kept volatile chemicals stable. Almost two dozen people, many of them emergency workers, were treated for exposure to the toxic fumes, and some 200 nearby residents were evacuated from their homes.
More than 2,500 facilities that handle toxic chemicals lie in federal flood-prone areas across the country, about 1,400 of them in areas at the highest risk of flooding, a New York Times analysis showed in 2018.
Leaks from toxic cleanup sites, left behind by past industry, pose another threat.
Almost two-thirds of some 1,500 superfund cleanup sites across the country are in areas with an elevated risk of flooding, storm surge, wildfires or sea level rise, a government audit warned in 2019. Coal ash, a toxic substance produced by coal power plants that is often stored as sludge in special ponds, have been particularly exposed. After Hurricane Florence in 2018, for example, a dam breach at the site of a power plant in Wilmington, N.C., released the hazardous ash into a nearby river.
“We should be evaluating whether these facilities or sites actually have to be moved or re-secured,” said Lisa Evans, senior counsel at Earthjustice, an environmental law organization. Places that “may have been OK in 1990,” she said, “may be a disaster waiting to happen in 2021.”
California Will Whiff on Climate Emissions Goals, 2 Reports Say
State Auditor & Next10.Org
California is unlikely to meet its ambitious climate goals, two reports released this week show.
The first, from California State Auditor Elaine Howle, doesn’t mince words: “The state will fall short of meeting the 2030 goal” of a 40% reduction in greenhouse gas emissions from 1990 levels “unless emissions reductions occur at a faster pace.” The audit, which found that transportation emissions have actually increased since 2013, rebuked the California Air Resources Board for overstating the impact of its emissions-reduction programs — including rebates that encourage Californians to buy clean vehicles, CalMatters’ Rachel Becker reports.
Howle: The air board “generally does not know how often many of its incentive payments influence consumers to purchase a cleaner (lower-emission) vehicle than they otherwise would have purchased.”
Gov. Gavin Newsom, who in September ordered the air board to ban the sale of new gas-powered cars by 2035, wants to direct $1.5 billion toward constructing electric charging and hydrogen fueling stations and subsidizing purchases of zero-emissions cars. The rebates would be paid with money from the state’s carbon trading program, which Howle characterized as “unpredictable.” Officials are currently reevaluating whether the program should form the cornerstone of California’s climate policy.
The second report, from the Energy Institute at UC Berkeley’s Haas School of Business and nonprofit think tank Next 10, found that Californians are paying two to three times more for electricity than it costs utilities to provide — which could push customers to use appliances powered by fossil fuels instead. And rates are expected to keep growing steadily for the next decade, according to the California Public Utilities Commission.
The report: “This massive gap … creates incentives that … discourage electricity consumption, even though greater electrification will reduce pollution and greenhouse gas emissions.”
The news comes as Newsom is scheduled to deliver today the keynote speech at a policy summit called Driving California Forward, dedicated to discussing “forward-thinking solutions to achieving California’s ambitious climate goals and zero-emission vehicle targets.”
State Auditor study:
http://auditor.ca.gov/pdfs/reports/2020-114.pdf?mc_cid=d8efa40eae&mc_eid=2833f18cca
Next10.Org study:
Legislature Ponders Offshore Wind Power Plan by 2022
CapRadio
About an hour-and-a-half southwest of Sacramento, hundreds of nearly 20-stories tall windmills line the Montezuma Hills in Solano County. On back roads through these rolling peaks, the windmills’ shadows steadily move with the sun over farms, sheep and cows.
This mechanical forest alongside the Delta mirrors what California lawmakers want to replicate out on the ocean: an idea is being floated to allow wind turbines to be built about 20 miles off the coast from Santa Barbara to the Oregon border. It is seen by many as a necessary move to help California reach its climate goals — perhaps the most important carbon neutrality by 2045.
There are many hurdles ahead for offshore wind — impacts to marine life and birds, the basics of how to build turbines in California’s deep waters, even the military — but research from environmental groups suggests a quarter of California’s energy needs could come from wind.
That’s a big deal, because as the state moves away from fossil fuels it will need to find ways to harness around-the-clock power; not all the state’s energy needs can come from the sun.
“For something like this, it’s more of a like a ‘go big or go home’ kind of situation,” said Eddie Ahn, executive director of the environmental group Brightline Defense.
In late 2020, his group came out with a study saying a large transition to wind energy would have a dual impact: stripping the state of its reliance from fossil fuels while removing unfair pollution burdens off low-income communities.
“We really want to make sure there’s not a need for those gas … power plants, the vast majority of which are located particularly in frontline communities, meaning typically low income households that are disproportionately burdened by environmental pollution,” he said.
A group of California lawmakers introduced a bill this session that would set a goal of producing 10 gigawatts of power from wind energy by 2040. It also would create a “short-term” goal of 3 gigawatts of power from offshore wind by 2030. The California Energy Commission would have until June 2022 to come up with a plan on how to reach the target.
This is how offshore wind works: Turbines sit on floating platforms, which are tethered to the ocean floor. As wind spins the turbines, the energy flows through cables underwater to a substation and then to shore.
The first offshore wind farms being considered in California are near Morro Bay, the Diablo Canyon nuclear power plant and Humboldt County. At least two other sites are being considered, including an area close to the Oregon border.
But how many wind turbines will it take to get 10 gigawatts of energy?
“The bigger the turbine size, the fewer you need,” said Mohit Chhabra, a senior scientist with the Natural Resources Defense Council’s climate and clean energy program.
“You’d need around 800 or so to get your 10 gigawatt number, and you’d need … around 800 to 900 square miles,” he said.
What sets these turbines apart from their terrestrial cousins is that they will be sitting on a body of water that is ever-changing, moving both from below and above. California’s deep waters and changing winds will be a challenge, and building enough floating windmills to make a dent in California’s energy needs could be difficult, said professor Seongkyu Lee, who studies aerodynamics and wind energy at the UC Davis Mechanical and Aerospace Engineering Department.
“You need to consider a combination of the meteorological conditions and oceanography environment,” he said. “That makes modeling very, very complicated. Especially when you deal with irregular waves, atmospheric stability or tropical storms. You’ll need to model all of these, because all of them are important.”
But Lee says investing in wind and figuring out the issues, including where to buy or create the wind turbines, are all important for making life on Earth more sustainable.
“I am very confident that the direction is correct,” he said. “If we have continuous research, continuous support, maybe in the future — 2050 or beyond — we can get 100% of energy from offshore wind turbines.”
Many California agencies and universities are considering how to properly invest in offshore wind. The California Energy Commission has collected data, held meetings and studied floating wind turbines since 2016.
“We certainly need to learn a bit more to understand how this could work,” Commissioner Karen Douglas said.
Even with models in Europe and on the East Coast, Douglas says more California-specific research is needed. Oceans are deep here. And there’s another issue.
“The real challenges for us have been we don’t have scalable, buildable areas off the California coast,” she said. “That’s because we really needed to resolve issues with the Department of Defense.”
Potential sites, especially along the Central Coast, are often used as military training areas, according to Douglas. But she thinks that pushback will be eased with support from the Biden administration.
There’s also the issue of how a city of oceanic wind turbines will impact wildlife.
The bird advocacy organization Audubon is in favor of offshore wind because climate change itself will do more harm to birds than wind turbines, according to Garry George, director of the national group’s clean energy initiative.
“So, 389 species of birds might go extinct in North America” due to the climate crisis, George explains. “So, yes, we need to do that, but we need to do it smartly.”
Since the wind turbines will be 20 to 30 miles out to sea, where there’s less biodiversity in the sky, he thinks the impacts to birds will be less. But they could affect migrating birds from other parts of the world.
“We don’t know exactly how they’re going to behave around floating turbines,” he said.
A nearly thousand-mile-long wind farm on the sea will also likely affect the state’s fishing industry and marine life.
While many environmental groups support offshore wind, they want to make sure projects won’t harm ecosystems too much. Others believe that with proper planning the effects could be limited.
“We believe that there is enough sea space off of our coast to make sure that we both protect marine life and tap into this renewable energy that we need,” said Laura Deehan, state director for Environment California.
One of the areas under consideration for offshore wind is near Humboldt. Jeff Hunerlach, district representative at the Operating Engineers Local #3 labor union in that area, sees offshore wind as a much-needed boost to the economy.
“It would be huge for our community, our kids and for jobs, jobs, jobs,” he said.
Offshore wind would put Humboldt on the map again, Hunerlach argues, after seeing divestment in industries like timber.
‘“From a labor standpoint, the project would bring numerous jobs, apprenticeship programs, training programs, statewide,” he said. “They’ve already got the area picked out of where they want to build the new docking station.”
With all of this in mind, advocates like Nancy Rader with the California Wind Energy Association contend investing in wind is a no-brainer.
She’s lobbied for wind energy in the state for more than two decades and hopes the Biden administration’s desire to increase reliance on wind energy speeds up the adoption process in California.
“We really should be cheering every time a wind turbine goes up because it means less fossil fuels killing the planet,” she said.
Establishing offshore wind in California will take years of research and planning. It could also cost billions and there’s no guarantee that it will happen, but in a decade or less Rader wants Californians to flick on their lights and know their homes are powered by wind.
https://www.capradio.org/162718
Cities Issuing Questionable Securities: “It Boggles My Mind”
NY Times
The City of West Covina, Calif., last year agreed to pay rent on its own streets. And in Flagstaff, Ariz., a new lease agreement covers libraries, fire stations and even City Hall.
They are risky financial arrangements born of desperation, adopted to fulfill ballooning pension payments that the cities can no longer afford. Starved of cash by the pandemic, cities are essentially using their own property as collateral of sorts to raise money to pay for their workers’ pensions.
It works like this: The city creates a dummy corporation to hold assets and then rents them. The corporation then issues bonds and sends the proceeds back to the city, which sends the cash to its pension fund to cover its shortfall. These bonds attract investors — who are desperate for yield in a world of near-zero interest rates — by offering a rate of return that’s slightly higher than similar financial assets. In turn, the pension fund invests the money raised by those bonds in other assets that are expected to generate a higher return over time.
If they can pull off the strategy, cities issuing these bonds can reduce their pension bills by an amount that’s the difference between what they earn and what they pay out. But as with any strategy based on long-term assumptions, there is risk.
Taxpayers can still owe the pension fund money if the investments don’t get the return they expect. And although most municipal debt is considered bulletproof because a government pledges to make its creditors whole in the event of a default, bonds like the ones West Covina issued don’t have that guarantee.
“It boggles my mind that anyone would buy these bonds,” said Jessica Shewmaker, who was a member of West Covina’s City Council when an investment banker pitched the idea last year as a way to cover a $1.2 million monthly bill from the California Public Employees’ Retirement System, or CalPERS. “These are streets that haven’t been paved in 20 years.”
Around the country, towns and cities are increasingly embracing more aggressive investment strategies as they struggle to cover funding gaps in their pension programs. The total public pension shortfall nationwide is about $4.7 trillion, according to Pension Tracker, a project of the Public Policy Program at Stanford University.
Many states have been trying to beef up their pension systems, which often means telling local governments to send in a lot more money. Few towns have cash just sitting around these days, but they can borrow it long term from investors, with maturities so far in the future that it feels like free cash. West Covina’s bonds, for instance, don’t need to be repaid for 24 years.
When a municipality borrows money for a public project, like a new road or bridge, it typically issues a general obligation bond, often after getting voter approval. These are the backbone of municipal finance, and come with robust guarantees — courts can force borrowers to pay, even if it means raising taxes.
But it’s different when a municipality borrows to cover a pension shortfall. Usually, this is done with a pension obligation bond. These also require voter approval in some states, but typically come with fewer guarantees to their buyers.
It gets murkier when municipalities use West Covina’s approach. Because the bond is issued by the dummy corporation, it’s often called something else — a “lease revenue bond,” in West Covina’s case — and doesn’t necessarily need voter approval.
The consequences of this approach became clear after Detroit declared bankruptcy in 2013 and couldn’t pay its creditors in full.
Like West Covina, Detroit had used dummy corporations to borrow money after it had been ordered to fund its pension. A few years later, in bankruptcy, Detroit tried to repudiate the $1.4 billion pension borrowing, calling it a sham transaction that used the dummy corporations to get around a legal debt limit. When the dust settled, the bondholders got about 14 cents on the dollar. The city’s retirees took haircuts, too.
The website of the 20,000-member Government Finance Officers Association, whose stated mission is to “advance excellence in public finance,” fairly screams: “State and local governments should not issue P.O.B.s.”
That hasn’t deterred governments. Nationwide, cities and states issued $6.1 billion in pension obligation bonds in 2020, more than in any year since 2008, according to data compiled by Municipal Market Analytics, a research firm. States with significant new pension borrowings last year included Arizona, Florida, Illinois, Michigan and Texas. In California, cities borrowed more than $3.7 billion to squirrel away at various public pension funds, breaking the old state record of $3.5 billion, set in 1994.
It’s a major comeback for this type of debt, said Matt Fabian, a partner at Municipal Market Analytics who has been writing about the deals for years. “They’re borrowing money and basically putting it into the market and gambling,” he said.
Mr. Fabian said his firm’s tally almost certainly missed the borrowing by municipalities that took West Covina’s approach, because those bonds used different names. Flagstaff rented its City Hall, libraries and fire stations last year to back a pension deal marketed as “certificates of participation.” In January, Tucson did the same, leasing two police helicopters, a zoo conservation center, five golf courses and the bleachers at its rodeo grounds, among other things. And a Chicago suburb, Berwyn, used “conveyed tax securitization bonds” to help fund police pensions.
The street rent that West Covina, a onetime outpost of citrus growers some 20 miles east of Los Angeles now engulfed in sprawl, pays the dummy corporation is essentially the money to service the debt. By issuing that debt, the city was able to make a lump-sum payment of about $200 million to CalPERS.
Like many city pension plans that CalPERS manages, West Covina’s is only partly funded. CalPERS treats the shortfall of roughly $200 million as a loan it has made to West Covina, charging 7 percent interest. That’s an extraordinary rate in today’s environment, but CalPERS uses it because that’s the return that the pension system projects it will, on average, earn on its investments.
By paying off most of its “loan” from CalPERS, West Covina doesn’t have to worry about the 7 percent interest, at least for now. The risk: If CalPERS misses its investment target, West Covina’s plan will be underfunded again, CalPERS will treat the shortfall as a new loan and the whole process will start over.
When West Covina considered its deal, the city’s investment banker, Brian Whitworth of Hilltop Securities, estimated that the city would pay 4 percent to borrow. Because CalPERS was shooting for 7 percent returns, he said, the city would save an estimated $45 million.
“On a bond around $200 million, it’s a pretty good savings,” he said.
No one demanded a projection of what might happen if CalPERS did not achieve 7 percent. Instead, Mayor Tony Wu grilled Mr. Whitworth on why he thought West Covina would have to pay 4 percent when El Monte, next door, was paying just 3.8 percent.
The proposal passed, 4 to 1, with Ms. Shewmaker voting against it because she considered the plan a gimmick to avoid putting the matter before voters, who she believed weren’t likely to approve a deal that would increase West Covina’s debt sixfold.
Mr. Wu, now a city councilman, said the city had to borrow, because it was locked into unsustainable pension plans and CalPERS refused to negotiate easier terms. The longtime owner of a mortgage-lending business, he said it was “crazy” for CalPERS to base everything on 7 percent when real interest rates were much lower. But he said challenging CalPERS would be a waste of time.
“It sounds very logical, but it’s not going to happen, because the ones who have power don’t want to lose it,” he said. “They’re going to fight us big time. They’re going to sue us to hell. Their attorneys will go laughing to the bank.”
California Contra-Indications:
Record Dip in Employment; Tax Revenues Top Forecast
State Dept. of Finance
EMPLOYMENT
California civilian employment decreased by a record 1.6 million or
8.6 percent in 2020 after increasing by 0.9 percent in 2019. Unemployment increased from 785,000 in 2019 to 1.9 million in 2020. The labor force fell by a record 450,000 people. California’s unemployment rate averaged 10.2 percent in 2020 following 4.1 percent in 2019. U.S. civilian employment decreased by 9.7 million or 6.2 percent in 2020, following an increase of 1.1 percent in 2019. There were 6.9 million more unemployed and 2.8 million fewer people in the labor force compared to 2019. The U.S. unemployment rate averaged 8.1 percent in 2020 following 3.7 percent in 2019.
California nonfarm jobs decreased by a record 1.2 million or 7.0 percent in 2020 following an increase of 1.5 percent in 2019. U.S. nonfarm jobs decreased by 8.6 million or 5.7 percent in 2020 following an increase of 1.3 percent in 2019. For California and the nation, job losses were largest for low-wage sectors, which lost 10.2 percent and 7.8 percent of their jobs respectively, compared to high-wage sector job losses of 4.0 percent and 3.8 percent, respectively.
California housing units authorized by building permits averaged 102,800 in 2020, down 8.8 percent from 2019. This follows a decline of 3.8 percent in 2019. Multi-family units fell by 18.5 percent to 44,300, while single-family units increased by 0.3 percent to 58,500. California’s nonresidential building valuation decreased by 30.4 percent to $22.4 billion in 2020, following a decrease of 3.9 percent in 2019.
California’s median home sales price for a single-family home grew by 11.3 percent to an average of $659,380 in 2020, following an increase of 3.6 percent in 2019. The California median home sales price ended the year at a record-high $717,930 in December, the fifth time that a new record was set in 2020. Home sales volume averaged 411,870 units in 2020, up 3.5 percent compared to a decline of 1.2 percent in 2019.
TAX REVENUE
Preliminary General Fund agency cash receipts for the first seven months of the fiscal year were $10.539 billion above the 2021-22 Governor’s Budget forecast of $106.524 billion. Cash receipts for the month of January were $7.453 billion above the 2021-22 Governor’s Budget forecast of $18.208 billion. $1.1 billion of the cash overage is due to the 2021-22 Governor’s Budget assumption that $1.1 billion in personal income tax refunds related to the Golden State Stimulus would be issued in January. As of the date of this bulletin, the Golden State Stimulus had not yet been enacted and therefore no tax refunds related to the Golden State Stimulus have been issued.
Personal income tax cash receipts to the General Fund for the first seven months of the fiscal year were $9.803 billion above forecast. Cash receipts for January were $7.389 billion above the month’s forecast of $15.507 billion. Withholding cash receipts were $31 million below the forecast of $7.586 billion. Other cash receipts were $6.206 billion above the forecast of $9.889 billion. Refunds issued in January were $1.323 billion below the expected $1.666 billion. Proposition 63 requires that 1.76 percent of total monthly personal income tax collections be transferred to the Mental Health Services Fund (MHSF). The amount transferred to the MHSF in January was $108 million higher than the forecast of $302 million.
Sales and use tax cash receipts for the first seven months of the fiscal year were $167 million above forecast. Cash receipts for January were $151 million below the month’s forecast of $1.775 billion. January included a portion of the final payment for fourth quarter taxable sales.
Corporation tax cash receipts for the first seven months of the fiscal year were $493 million above forecast. Cash receipts for January were $273 million above the month’s forecast of $711 million. Estimated payments were $351 million above the forecast of $499 million, and other payments were $6 million above the $284 million forecast. Total refunds for the month were $85 million higher than the forecast of $72 million.
https://www.dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/documents/2021/Feb-21.pdf
US Job Market Strengthens
Wall Street Journal excerpt
America’s blue-collar workforce is filled with signs of a strengthening job market.
An Orlando, Fla.-area home builder is seeking to add four construction workers to a six-person team in the midst of soaring housing demand during the pandemic. In Atlanta, a forklift driver rakes in overtime pay because the warehouse that employs him is so busy distributing packages. A Chicago-based truck-trailer manufacturer is increasingly hosting drive-through job fairs and raising wages by up to 7% as hiring picks up across its nine production plants.
Nationally, employment in residential construction, package delivery and warehousing now exceeds pre-pandemic levels. Manufacturers have steadily added back jobs after slashing payrolls last spring, though employment remains down about 5% from February 2020, according to Labor Department data. Job openings in many blue-collar occupations broke above pre-virus levels last summer and remain significantly elevated, figures from the online job site Indeed show.
Strength in housing and e-commerce during the pandemic has helped propel hiring in blue-collar occupations, which were hard hit by previous recessions. Many economists and companies expect blue-collar jobs to continue growing, though at a slower pace, after the coronavirus is contained. They predict the key factors driving employer demand for blue-collar workers—a swift pickup in online orders and a buoyant housing market—will largely stay even after vaccines are widely distributed and consumers shift some of their spending from goods to services.
“The demand for the workers is not going to go down,” said David Berson, chief economist at Nationwide Mutual Insurance Co. “We’re still going to need good warehousing. We will continue to see great strength in the demand in the construction area, particularly housing.”
Economists also expect service-industry jobs, such as retail and restaurants, to see particularly big gains as the pandemic fades, helping propel broader economic growth.
Many blue-collar companies are struggling to find workers to keep up with demand. Millions of people aren’t seeking work, in some cases because of increased child-care responsibilities or fear of contracting the coronavirus. Fewer young people are seeking work that involves operating machinery or lifting heavy objects, according to industry experts.
One factor driving construction and housing jobs has been the Federal Reserve, which cut short-term interest rates to near zero last year and has indicated rates will remain low for the foreseeable future. Millennials—now in their prime homebuying years—will likely maintain a strong appetite for houses after the pandemic. Further, the pandemic sped up employers’ embrace of remote work and consumers’ accompanying desire for more space, often in lower-density areas. Telecommuting is expected to endure, though at lower levels than during the pandemic.
Home builders will likely remain in hiring mode as they scurry to bring more homes into a market that has suffered from historically low inventory levels. The residential construction sector began hiring again in May after cutbacks at the onset of the pandemic. Employment in the sector is now up 1% from February 2020, while it is down 6.5% across all industries.
Job openings on Indeed are up 25.6% in construction compared with last February. Openings also rose by double digits in many transportation and distribution positions that involve delivering items such as yoga pants, air fryers and groceries to homes. Overall job openings rose 3.9% over the past year.
The blue-collar gains largely result from the growing adoption of online shopping during the pandemic, which is likely to last permanently. In a recent survey by the technology company Pitney Bowes, consumers said they do about 59% of their shopping online, and they expect to do 56% online after the pandemic ends. Before the coronavirus hit, consumers did about 39% of their shopping online.
Rapid growth in online orders during the pandemic has transformed how goods are distributed. In the past, items often just moved from the manufacturing plant to a big-box store for customer pickup, said Melissa Hassett, vice president of client delivery for ManpowerGroup Talent Solutions. The increase in home delivery “creates a need for many, many more drivers and many more touches on the package between the manufacturing plant and the home,” Ms. Hassett said.