California could lose 1.6 million jobs by summer due to COVID

California could lose 1.6 million jobs by summer, taking the state from recordlow unemployment to a dismal economic picture that could rival or exceed the Great Recession in a matter of weeks.

But economists say the recovery could be fairly swift, maybe just as swift as the downturn, if the coronavirus pandemic is brought under control quickly.

A new analysis from the Economic Policy Institute, a left-leaning think tank, said Wednesday the nation and California could lose about 11 percent of their private-sector jobs to COVID-19 by June. That would translate into 14 million jobs erased coast-to-coast and 1.6 million in California.

The updated projection shows how quickly economic conditions have deteriorated in the week since California Gov. Gavin Newsom and other governors issued “stay at home” orders that have brought much of the economy to a halt. A week ago the EPI said California’s job losses would total 600,000.

The report’s co-author, David Cooper, said the new estimate took into account the effect of a $1 trillion stimulus plan -a figure that’s already been surpassed. Congressional leaders announced early Wednesday they had agreed on a $2 trillion stimulus package, and Cooper said that the extra funding will likely reduce job losses.

“Things are happening so fast that any projection has a huge amount of uncertainty,” said economist Jeff Michael of the University of the Pacific.

Still, he found the EPI estimates plausible. A 1.6 million job loss, coupled with the 753,000 listed as already unemployed before the pandemic struck, would leave California with about 2.3 million people out of work. That would roughly match the worst of the Great Recession, when unemployment peaked at 12.3 percent in 2010 in California.

Compared to the Great Recession, this downturn will come more quickly. “Nearterm shock is even steeper and peak is even worse,” Michael said. “You have 20 percent of your economy going into hibernation.”

The Bee applied the assumptions in EPI’s latest analysis to regions throughout California. The analysis found that the Sacramento metro area could lose about 88,000 jobs, or about 11 percent of its private-sector workforce.

That would put the region’s unemployment rate around 12 percent. Unemployment in the Great Recession peaked at 12.7 percent in Sacramento in early 2010.

But Michael and Chris Thornberg, founder of Los Angeles consulting firm Beacon Economics, said the recovery could happen a good deal faster than it did following the last recession.

The Great Recession was marked by the collapse of the construction and financial industries, and the loss of billions of dollars in home values. Those over-inflated values were driving a lot of consumer spending as Americans borrowed against their home equity to finance purchases of boats, appliances and other goods.

That meant years of slow and painful recovery.

This time, the economy has been brought to its knees by a virus. If the public health crisis passes in, say, two months, economic activity should snap back into place, said Thornberg, who’s also director of the UC Riverside Center for Economic Forecasting.

The downturn “is going to be quick, it’s going to be nasty, and it’s going to be gone,” Thornberg said.

Federal and state officials are debating how quickly to ease shutdown measures.