SACRAMENTO, Calif., April 9, 2026 /PRNewswire/ — A new study released today by the Pacific Research Institute finds that California’s economic performance has fallen sharply behind the rest of the nation, with job growth since the COVID-19 pandemic at less than half the national rate, while the state’s high cost of living is erasing its income advantage.
Click here to download the study
The report, “California at a Crossroads: How Bad Policy Cost California Its Economic Edge – and How to Win It Back,” authored by PRI scholars Dr. Wayne Winegarden and Kerry Jackson, uses federal government data to document a troubling shift in the state’s economic trajectory.
“The data shows that California’s economic challenges are no longer theoretical—they are measurable and worsening,” said Winegarden. “The state’s weak job growth and shrinking private sector signal that California is at a crossroads. Without meaningful policy reforms, the gap between California and the rest of the country will continue to widen.”
According to the study, from February 2020 to December 2025, non-farm job growth was 2 percent compared to 4.3 percent in the rest of the United States, marking a significant reversal from prior decades when the state outperformed the nation.
California’s slowdown is particularly acute in the private sector—the key driver of innovation and long-term prosperity. Excluding health care and social assistance industries, private sector jobs declined by 2.7 percent during the period, compared to 3.4 percent growth nationally.
The report also highlights a growing affordability crisis. While California’s median household income is roughly 20 percent higher than the national average, that advantage disappears once taxes, housing, and energy costs are considered. After accounting for these expenses, the typical California household has 35 percent less disposable income than the national median.
Other Key Findings
The authors identify several other troubling trends:
- California is losing jobs in core industries that historically powered the state’s economy. The state lost nearly 52,000 tech jobs in 2024, while manufacturing jobs fell by 38,000 between 2010 and 2025, and total finance sector employment declined 10.3 percent between 2019 and 2025.
- The number of private sector jobs outside health care is lower today than before the COVID-19 recession.
- The state continues to experience a long-term population outflow based on annual U.S. Census data, with hundreds of thousands more people leaving the state each year than are arriving from other states.
The study argues that California’s economic underperformance is driven by high taxes, costly housing, expensive energy, and an overly burdensome regulatory environment that discourages business investment and job creation.
“California stands at a policy crossroads,” said Jackson. “Policymakers can continue down the current path of high costs and slow growth, or they can embrace reforms that restore opportunity, affordability, and economic dynamism. The direction chosen will determine whether the state regains its leadership—or continues to fall behind.”
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SOURCE Pacific Research Institute
