California’s jobs market is coming back, and the statehouse is bragging.From Bloomberg:
“What these new figures do is drive a stake through these weak Republican talking points,” said Gil Duran, a spokesman for California’s Democratic governor, Jerry Brown. “California jobs are coming back at a higher rate here. We hope that happens everywhere.”
Indeed, state-by-state unemployment rates are always political, as anyone who watched Ohio Governor John Kasich or Wisconsin Governor Scott Walker speak at the Republican Convention last night knows.
Every politician likes to use their states job performance to vindicate their political beliefs.
Texas is held up as an example of a shining low-tax no-bureaucracy capitalist haven. California is likened to a socialist economy that’s destroying itself.
But as we just showed, the only thing that really effects California’s relative performance is housing.
This chart we made shows California’s relative unemployment rate (red line) vs. a blend of California housing datapoints.
When housing improves, California’s jobs fortunes improve. When housing weakens, the opposite happens.
But what about this issue of California vs. Texas, which is the frame of the Bloomberg story about California’s comeback.
Well when we think about Texas, the unique factor we think about is oil.
And so we create this chart, which is like the above chart, but with a twist.
First, the red line is the Texas Unemployment Rate divided by the California Unemployment Rate. So when it’s going up, California is improving relative to Texas.
The blue line is the same California housing index divided by the price of West Texas Intermediate oil.
So in other words, the blue line goes up when housing goes up, but down when oil goes up.
The two lines match very nicely going back a long way.
When oil is doing well relative to housing, Texas benefits, When housing is doing well relative to oil, California benefits. Politics doesn’t have much to do with it.