A new Pacific Research Institute study released this week paints a stark picture of California’s job market, with private-sector employment either stagnating or shrinking, tech and manufacturing shedding jobs, and some of the state’s biggest metros actually losing residents. The authors argue that a mix of high costs, heavy regulation and fiscal choices has cooled hiring and could fuel a fresh round of economic and budget battles in Sacramento, just as candidates and lawmakers are already trading competing storylines about where the state is headed.
What the study found
According to a report by the Pacific Research Institute, California’s nonfarm job growth from February 2020 through December 2025 was roughly 2 percent, less than half the 4.3 percent gain recorded nationwide, and the state lost nearly 52,000 tech jobs in 2024. The paper also finds that California has about 334 manufacturing jobs per 10,000 residents, well below leaders such as Wisconsin and Indiana, and it flags a one-year population drop in Los Angeles County of 53,394 people between July 2024 and July 2025.
Newsom pushes a brighter picture
Gov. Gavin Newsom is not buying the doom and gloom. He has argued that California still leads on innovation, manufacturing and research, and he leaned hard into that message in his January State of the State address. “No state builds more ladders to success or sees around more corners,” Newsom said, while his office pointed to Jobs First investments and training programs as evidence that the economy is on the mend, a framing laid out in a briefing from the Governor’s Office.
PRI’s prescriptions: taxes, CEQA and housing
Authors Wayne Winegarden and Kerry Jackson contend the slowdown is largely policy-driven and outline several ways they think California could turn the ship. Their recommendations include trimming state tax collections closer to the national per capita average of about $4,329 and tightening rules on CEQA litigation to speed housing and infrastructure projects. The report argues that those moves would lower costs for businesses and families and help rebuild private-sector job growth, while acknowledging that such reforms would face substantial political and legal resistance. The recommendations are detailed in the Pacific Research Institute study.
What this means locally
On the ground, the report highlights an awkward reality for local leaders. The Bay Area still concentrates much of the state’s AI and research and development firepower, yet that edge has not translated into broad-based job gains across California. At the same time, population losses in Los Angeles and several Southern California metros could shrink local labor pools and consumer demand. City halls, developers and business groups will be watching any springtime legislative action on taxes, CEQA and housing for signs that campaign rhetoric turns into policies that actually change hiring patterns, a point underscored in coverage by the Times of San Diego.
Whether California pivots on those policies will be a central question in the 2026 campaign and the next legislative session. For now, the Pacific Research Institute study serves as a fresh stack of talking points and data that both critics and defenders of the state’s economic strategy are likely to reach for in the fights ahead.
