California raised a bunch of taxes this year. Its economy hasn’t collapsed.

Six months ago I wrote that California was diving into an interesting political and economic experiment: Could it keep adding jobs even after slapping its wealthiest residents with the highest state income tax rate in the nation? Most of the economists I talked to in the state predicted the tax hikes wouldn't matter much. A lot of conservatives wrote me to predict the opposite.

What's happened since? Well, California kept adding jobs, and at about the same rate as the nation overall. Private-sector employment rose by 0.8 percent in the Golden State from January through July. Across the country, it rose 0.9 percent.

The analysts at Beacon Economics in Los Angeles noted recently that California accounted for a quarter of the nation's net job growth last month. The State Department of Finance reports that there were 374,000 fewer unemployed Californians in June than there were a year earlier: "The year-over-year decrease was the largest on record."

Unemployment isn't as good of a measure as job growth, because it includes people moving in and out of the labor force. Still, the stats show California's unemployment rate a) remains higher than the national average and b) has fallen faster than the nation's since January, dropping a full percentage point.


Back to job growth: California's has slowed compared to the same time last year. This is a graph of percent change in employment, month to month, for 2012 and 2013:


One-month percent change in employment for California, 2012 and 2013. Source: Bureau of Labor Statistics.

Here's the same chart for the nation as a whole:


1-month percent change in employment, United States, 2012 and 2013. Source: Bureau of Labor Statistics.

To summarize: Eight months after raising sales and income taxes, California is still adding jobs on par with the rest of the nation, but not as fast as it added jobs up to this point a year ago.

So what can we conclude about the degree to which tax hikes have slowed the state's growth?

Probably not a ton, at least not yet. "The data are not such that there is a discernible pattern in California distinct from the U.S. or past CA to US data patterns," Jerry Nickelsburg, a senior economist at the UCLA Anderson Forecast, said in an e-mail earlier  this week. "Thus, one can only speculate at this point."

One thing, at least, seems clear: The doomsday predictions haven't come true. California is still recovering. We'll check in again in a few months to see if the data give us any better idea of whether, and/or how much, higher taxes have dampened that recovery.

Jim Tankersley is the editor of Storyline, where he explains complex public policies and illuminates their human impact.
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