California still booming, but when will it bust again?

California’s economy is booming with record-high employment, record-low unemployment and billions of extra tax dollars flowing into the state treasury.

The official jobless rate dropped to 4.3 percent in February, only slightly above the national rate of 4.1 percent and nearly a full percentage point lower than it was a year earlier.

“The record low unemployment rate signals a taut labor market, but the labor force has been growing at a moderate pace and has enabled the state’s industries to continue hiring,” Robert Kleinhenz, director of research at Beacon Economics and the Center for Forecasting at UC Riverside, said in a recent report.

“Looking at individual industries, continued increases in construction jobs reflect ongoing strength in that sector, while California manufacturing has seen a welcome surge in hiring in recent months following a slowdown at this time a year ago.”

The state Department of Finance reported that while February’s tax collections were slightly below the state budget’s assumption, overall revenues for the 2017-18 fiscal year are $2.6 billion above expectations. So what’s not to like? Well, for one thing, no one knows how long the current boom will last. The state averages one economic boom and one bust per decade, and California’s recovery from the Great Recession has lasted well beyond historic expectations. In other words, as Gov. Jerry Brown, the Capitol’s resident economic worrywart, often points out, California is overdue for a downturn.

That’s why he wants to squirrel away as much as politically possible of the state’s current flood of revenues, saying they’ll be needed if the economy tanks, even though his “rainy day fund” would be quickly exhausted by even a moderate recession.

Brown’s fellow Democrats in the Legislature are more inclined to spend the bounty, particularly on expanding health coverage to more of the poor, setting up a potential confrontation in Brown’s 16th and final year as governor.

Brown’s worries about the economy mirror those of Cal Lutheran University’s Center for Economic Research and Forecasting.

“We are currently forecasting a convergence in the economic fortunes of California and the nation. While California has historically grown at a rate that is significantly higher than the nation’s, 2017 may have marked a turning point,” the center’s director, Matthew Fienup, said in a recent appraisal.

“Despite being in an expansionary phase of the business cycle and despite a national growth rate that is well below the post-World War II average growth rate, California registered two quarters of growth that were slower even than the nation’s. While growth was accelerating around the country, it appeared to slow down in California.”

There are clearly several negative factors that could sabotage the state’s current boom.

For one thing, President Trump’s imposition of tariffs on imported goods, particularly those from China, and his disdain for the North American Free Trade Agreement could have disproportionate impacts on California’s export-heavy economy, particularly technology and agricultural sectors.

For another, fast-rising housing costs are making it more difficult for employers to recruit much-needed high-skill employees and compelling many Californians to flee to states where they can afford to live.

As Cal Lutheran’s analysis points out, “For the past 25 years, the number of households and people moving out of California to other states has been greater than those moving into California from other states. This points to a future for the state that exhibits less demographic and economic vitality. Our forecast calls for the net domestic migration trend to continue to worsen. Related to this, the state’s population growth will decline. Population growth and economic growth are closely interlinked.”

Dan Watlers is columnist for CALmatters, a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.