State’s sluggish economy deserves spotlight in 2026

There is Gov. Gavin Newsom’s all-but-announced campaign for president, centered on his self-appointed role of resistor-in-chief to Trump. As Newsom continues to troll Trump this year we may learn whether it continues to advance Newsom as a White House frontrunner or becomes tiresome and off-putting.

As 2025 ended Axios, a news website, reported that Newsom’s potential rivals are ratcheting up efforts to undermine his bid, arguing that, as a California progressive, he’s unelectable.

Another point of political fixation is Newsom’s successful effort to gerrymander California’s 52 congressional seats to help Democrats recapture control of the House in 2026. Whether it works is a question hanging over his presidential ambitions.

Still another is the campaign to choose a successor to Newsom. It so far has attracted a large contingent of Democrats without, as yet, a clear leader. There’s a theoretical possibility that with as many as a dozen Democrats in the field, the two Republicans could finish first and second in the June 2 primary and face each other for the governorship in November, despite the GOP’s very weak standing among voters.

This year’s election cycle also promises to be another showdown of moneyed interests via dueling ballot measures, with those either increasing or decreasing taxes at the top of the heap.

While political junkies can feed their habits this year, the more profound issue that faces California will be its moribund economy.

Newsom often brags that California’s $4 trillion economy, were it a nation, would rank fourth in the world. However, it has seen zero net job growth since the COVID-19 pandemic ended and recently has experienced employment shrinkage.

More than a million Californians in the labor force are jobless and the state’s unemployment rate, currently 5.6%, has been the highest or near the highest of any state for several years.

Employment doldrums have affected even the state’s hallmark sectors, most obviously Southern California’s withering film and TV production industry and the Bay Area’s high technology concentration.

The latter has almost single-handedly propped up the state’s economy and generated a huge portion of tax revenues, but layoffs have proliferated as artificial intelligence is increasingly employed — a syndrome that also affects Hollywood.

Stubborn, or even increasing, unemployment makes it more difficult for state and local governments to cover their budget deficits — thus underpinning the thrust for tax increases on state and local ballots. The sluggish economy also hampers efforts to improve two of the state’s most pressing socioeconomic issues, its highest-in-the-nation poverty and homelessness levels.

Even Californians who have homes and jobs are feeling the economic pinch. Combining economic data with polling results, the Public Policy Institute of California recently discovered rising economic angst among California residents.

“California is one of the largest economies in the world, but many working Californians do not feel economically secure (and) they struggle to pay their bills, save for the future, and balance the demands of work and daily life,” PPIC reported, adding that polling data “indicate that pessimism about future economic opportunity has become even more pervasive amid recent economic volatility.”

As he shifts into presidential campaign mode, Newsom has every reason to keep bragging about the state’s economy. But those running to replace him and state legislators should make 2026 the year to recognize that California has serious problems, to bore into the underlying causes and to do what they can to once again make California thrive.

History tells us that taking prosperity for granted —think Detroit — is an invitation to economic ruin.

Dan Walters has been a journalist for more than 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics. He can be reached at dan@calmatters.org.