CALIFORNIA’S ECONOMIC RECOVERY from the devastations of the pandemic was stronger than previously estimated — but skyrocketing inflation could rob the state of its hard-earned gains.

Those were the main takeaways from a report this month from the state Employment Development Department, which pinpointed California’s January unemployment rate at 5.8 percent — the same as its December rate, which was revised down from 6.5 percent due to updated figures showing sizable job gains that month. Other key takeaways:

  • California saw a 7.4 percent increase in job gains from January 2021 to January 2022, compared to 4.6 percent nationally.
  • The state has regained approximately 82 percent of the nearly 2.8 million jobs lost in the first two months of the pandemic — more than previously projected.

Gov. Gavin Newsom, who lauded California’s economic prowess in last week’s State of the State speech, said the report was evidence that the state’s COVID-19 restrictions worked.

  • Newsom“Our approach has been to follow the science while supporting those hardest hit by the pandemic, and it not only saved tens of thousands of lives — it got our state back to work faster and better than the rest of the country.”

But there’s still a long way to go: California tied with Nevada for the nation’s highest unemployment rate in December, the last month for which federal statistics are available. The Golden State’s civilian labor force is still down by 452,000 workers compared to pre-pandemic levels, according to Michael Bernick, a former EDD director and attorney at Duane Morris. And inflation rose 7.9 percent nationwide in the yearlong period that ended in February, the U.S. Bureau of Labor Statistics reported last week — the highest rate in 40 years.

  • Bernick: “Inflation has already cut into wage gains in California, particularly the wage gains of lower income workers, and threatens to significantly slow growth.”
  • Soaring inflation, plus Russia’s war on Ukraine, have contributed to eye-popping gas prices: The average price in California for a regular gallon was $5.74 on Sunday, compared to $5.29 a week ago, according to the American Automobile Association.

On Monday, Republican state lawmakers were expected to force a vote on a bill to eliminate California’s 51-cent gas excise tax for six months — one of several ideas Newsom and legislators have proposed to help people hurting at the pump. (Another bill, introduced March 11 by Democratic state Sen. Ben Allen of Santa Monica, would require oil refiners to disclose their profit margins on each barrel of gasoline sold.)

  • But tinkering with the gas tax appears to be increasingly politically unappealing for California’s supermajority-Democratic Legislature. “We need to just leave the gas tax alone and focus on other forms of tax rebates or other supports for working families,” state Sen. Scott Wiener, a San Francisco Democrat, told the Los Angeles Times.
  • Still, some question whether rebates — potentially similar to the Golden State stimulus checks sent last year to millions of Californians — could worsen runaway inflation. “We have an overheated economy,” Republican political consultant Rob Stutzman told the Sacramento Bee. “Does it really make sense to dump money back in?”

This story originally appeared in CalMatters.