California lost jobs for the fourth consecutive month in September — and it's expected to add only 62,000 new jobs next year as high taxes drag on business formation, according to a report released Thursday.

The annual Chapman University economic forecast released Thursday found that the state's job growth totaled just 2% from the second quarter of 2022 to the second quarter of this year, ranking it 48th among all states.

That matches California's low ranking on the Tax Foundation's 2024 State Business Tax Climate Index, which measures the rate of taxes and how they are assessed, according to the Gary Anderson Center for Economic Research report by the Orange, Calif., school.

The state also experienced a net population outflow of more than 1 million residents from 2021 to 2023, with the top five destinations being states with zero or very low state income taxes: Texas, Arizona, Nevada, Idaho and Florida, the report noted.

What's more, the average adjusted gross income for those leaving California was $134,000 in 2022, while for those entering it was $113,000, according to the most recent IRS data on net income flows cited by the report.

"High relative state taxes not only drive out jobs, but they also drive out people," said the report, which expects just a 0.3% increase in California jobs next year leading to the 62,000 net gain.

More unsettling, the report said, was a "sharp decline" in the number of companies and other advanced industry concerns established in California relative to other states, in such sectors as technology, software, aerospace and medical products.

California accounted for 17.5% of all such establishments in the fourth quarter of 2018, but that dropped to 14.9% in the first quarter of this year. Much of the competition came from low-tax states, the report said.

California saw the number of advanced industry establishments grow from 89,300 to 108,600 from 2018 through this year, but low-tax states saw a 52.2% growth rate from 164,000 to 249,600 establishments, it said.

Also on Thursday, the U.S. Bureau of Labor Statistics released its monthly states jobs report, which had been delayed by the government shutdown. It, too, showed California had a weak labor market with the state losing 4,500 jobs for the month, edging up its unemployment rate from 5.5% to 5.6%, the highest in the nation aside from Washington, D.C.

The state has lost jobs since June as tech companies in the Bay Area and elsewhere shed employees and spend billions of dollars on developing artificial intelligence capabilities.

There have also been high-profile layoffs in Hollywood amid a drop-off in filming, runaway production to other states and countries, and industry consolidation, such as the bidding war being conducted over Warner Bros. Discovery. The latter is expected to bring even deeper cuts in Southern California's cornerstone film and TV industry.

Michael Bernick, a former director of California's Employment Development Department, said such industry trends are only partially to blame for the state's poor job performance.

"The greater part of the explanation lies in the costs and liabilities of hiring in California — costs and especially liabilities that are higher than other states," he said in an emailed statement.

Nationally, the Chapman report cited the Trump administration's tariffs as a drag on the economy, noting they are greater than the Smoot-Hawley Tariff Act of 1930 thought to have exacerbated the Great Depression.

That act only increased tariffs on average by 13.5% to 20% and mainly on agricultural and manufactured products, while the Trump tariffs "cover most goods and affect all of our trading partners."

As a consequence, the report projects that annual job growth next year will reach only 0.2%, which will curb GDP growth.

The report predicts the national economy will grow by 2% next year, slightly higher than this year's 1.8% expected rate. Among the positive factors influencing the economy are AI investment and interest rates, while slowing growth — aside from tariffs and the jobs picture — is low demand for new housing.

The report cites lower rates of family formation, lower immigration rates and a declining birth rate contributing to the lower housing demand.

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