Speculating the Demographic impact of the Recession on California: Part II

The demographic future of White Californians

Part 1

Source: 1CoastalJournal Twitter

Peter Zeihan has a video about why California’s lucky streak is running out. Zeihan points out that immigration is no longer enough to offset California’s ageing population. The other point is that since California’s economy is so heavily linked to globalization, both tech and the shipping industry, its economy will be harmed tremendously by deglobalization. Plus sustained interest rate hikes will hamper the tech industry. California now has a massive budget deficit ($68 billion), after recently having a record surplus. This is mostly due to declining tax revenue, which is a recessionary signal.

California lost a net of 340k people to other states in 2021, and an estimated 871k left in the year 2022 alone. After long concerns about overpopulation, new projections show California’s population remaining about the same until 2060. In contrast with the Rustbelt or even New York, California has managed to sustain past recessions without losing significant population. Until very recently, California has benefited from other parts of the Nation’s exoduses. During the Great Depression, California was a magnet for transplants from all over America, especially those fleeing the Dust Bowl. Then many New Yorkers relocated to LA in the 70s. With this recession, or perhaps depression, California could end up being significantly worse off than the rest of the Nation.

Source: ProducerCities Twitter

While California’s overall population decline is a recent phenomenon, California’s domestic exodus began in the 90s, though was offset by immigration. Plus there were some temporary rebounds in domestic migration. Despite the early 90s recession, the worst of California’s White displacement happened throughout the 90s, including when the economy was strong. The rate of White decline was actually worse in the 90s than the 00s and 2010s. This was in part due to the decline of the aerospace industry, and declining military presence at the end of the Cold War. Not to mention Boomers moving out of state, around the time that they were starting families.

Aerospace was replaced by the rise of Big Tech, which attracted a lot of new immigrants from South and East Asia. Whites were also disproportionately impacted by the first tech bubble crash, as the tech industry was still fairly White in the 90s. Silicon Valley became much more Asian after the rebound in tech, with its workforce becoming majority Asian around 2010.

The 2008 recession/foreclosure crisis pushed a lot of the remaining working class Whites out of California, especially in places like the Inland Empire, but also the remaining downscale White renters in urban areas. A study from the Public Policy Institute of California showed that downscale Whites are already the demographic most impacted by the exodus. I predict that this recession will push out much of the remaining working class Whites from California.

For California’s White demographic, affluent Whites occupy the most desirable urban and suburban real estate in coastal metros. Think LA’s Westside or Marin County. Middle income Whites either live as a minority in diverse inner-ring/streetcar suburbs, move to sprawl exurbs, or leave the State. The remaining White proletariat either live in rural communities or are part of the urban homeless population. This new wave of White flight to the suburbs, in response to urban decay, is some reversal of the trends of the 00s and 2010s. Basically American cities started to become more like Paris, where White professionals occupy gentrified urban cores while immigrants increasingly dominate inner ring suburbs. While there are parallels to 70s, 80s, and 90s type White flight, California’s suburbs are increasingly like urban cores, in that they are either affluent or diverse.

Source: DuringJs Twitter

The 08’ housing crash also disproportionately impacted Hispanics, both economically and somewhat demographically. While Hispanic immigration and fertility rates were lower in the 2010s than the 90s and 00s, there was still Hispanic growth in the 2010s. In the mid-2010s, there was some speculation about whether California may not actually become majority Hispanic, as previously projected. I could also see the recession driving out a lot of lower middle class Mexican Americans. Immigration to California slowed a bit from previously highs, though it will be interesting to see what impact this new wave of migrants will have on California’s demographics. California seems much less impacted by the migrant crisis than other states, though that could change.

California has extreme inequality with the Nation’s 5^th worst geni-index, the 6^th highest per capita income, but also one of the Nation’s highest poverty rates. The recession will only exacerbate inequality, much like the 08’ recession and pandemic, though probably worse. Despite hype about an exodus of the wealthy, I expect a much worse exodus of the working class. Expect the Inland Empire and Central Valley to become much poorer, even if these areas benefited from remote work. The recession will accelerate gentrification, as struggling renters will lose their jobs and leave. For instance, during the 08’ recession, a lot of lower income BIPOC renters were pushed out of places like Oakland and LA’s urban core. They ended up moving out to far out inland exurbs, and were replaced by gentrifiers. Despite California trending YIMBY, expect elites in coastal California to exploit the recession to push out the “riffraff.”

Source: zerohedge

More mom and pop landlords will default, due to having to refinance their properties at higher interest rates. A lot of these foreclosed properties will get bought up by wealthy investors. We will see both gentrification but also foreclosed properties rented out to poorer migrants, and an increase in homelessness and RV encampments. Overall, it is California’s middle class that will get hollowed out, with middle income areas either becoming poorer or more affluent.

While I lean pessimistic about California’s White demographic, the economic crisis is a demographic wildcard. While the recession could increase White flight, non-Whites seem to be more impacted by boom and bust cycles, both the benefits and the hardships. For instance, the Biden admin subsidizing bad credit, which could create a foreclosure crisis like 08’. Plus upwardly mobile immigrants are heavily dependent upon low interest rates, both for home mortgages and heavily immigrant tech jobs. Though there has been a recent upswing in wealthy Chinese buyers in Southern California, after a decline. Regardless, high interest rates could slow down demographic change, especially in more affluent White areas. Also gentrification means that certain areas could become Whiter.

The recession will disproportionately impact the working class and tech sector, which are both disproportionately non-White. In contrast, the non-tech wealthy, who are disproportionately Whiter, will weather the storm better. Expect to see a lot of remote workers and new buyers, lose their jobs and unable to pay their mortgages. For instance, the East Bay suburb of Dublin, which has the sharpest decline in real estate in the entire Nation, boomed during the pandemic, due to attracting a lot of tech immigrant, remote workers from Silicon Valley. In contrast, White remote workers were more likely to leave California altogether. I could also see a segment of White Millennials, who left California, having to move back in with their parents in California.

source: Center for Inclusive Democracy

As things stand now, those who own property, who also tend to be older, are doing well financially. There is a lot of resentment over the inter-generational wealth gap, as well as from renters against home owners. Certainly older, well off homeowners benefited, at younger generations’ expense, from the housing scarcity caused by nimbyism, increased demand from immigration, as well as corrupt monetary policies. The post-pandemic financial bubble/bull market tremendously enriched both 401ks and real estate. However, a decent segment of retirees are experiencing economic hardship, such as having to return to work.

A financial crisis could economically wipe out a lot of retirees, due to pensions being tied to stocks and bonds, just around the time that Boomers are retiring in mass. A bond crisis could also cause local governments and pensions to go insolvent, which would create pressure to raise taxes. When inflation goes up, demand for bonds goes down, and lower demand drives down bond prices. Stocks are rising amidst expectations of a Fed pivot while bond markets indicate potential dangers. Not to mention the impact of inflation on fixed incomes, as well as high interest rates on reverse mortgages, as far as refinancing.

While wealthy seniors might be fine, the middle class elderly and the house rich/cash poor could especially be impacted. Financial YouTuber, John Williams, predicts a massive wave in the elderly selling their homes. Expect a big increase in downsizing, even among wealthy retires, especially with Prop 19 which makes Prop 13 property tax protections portable.

With the trend in California’s population rapidly ageing, a scenario of the elderly downsizing in mass, could have a dramatic impact on demographics. Stats on the exodus show that both Boomers and Millennials are leaving California metros in droves. Gentrification could be exacerbated, as a lot of working class elderly homeowners in LA and the Bay Area sell their homes. This would further wipe out the middle class, as middle class elderly are replaced by wealthy buyers, which also negatively effects younger relatives. You could say that is eugenic, as it might increase family formation amongst affluent Whites, even if it’s the wealthy screwing over the middle class. Overall it would be a mixed bag for Whites, from a demographic standpoint. As the elderly are disproportionately White, it would likely mean a net decline for Whites.

There is a narrow demographic window, since when the current generation of White elderly are gone, they will more likely be replaced by high skilled immigrants and corporate DEI hires. For now, there is still a larger subset of well off Whites starting families, who might otherwise look out of State. I could also see an increase in SB9, lot split projects, amongst family members rather than trying to sell at lower prices, which is good for rootedness. However, a lot depends upon whether there is a credit crunch.

Expect the recession to reduce fertility and family formation for all demographic groups, though the middle and working class will be more impacted than the wealthy. Remote work benefited fertility for the upper class during the peak of the pandemic bubble. While California attracted Millennials for the urban experience (eg Hipsters), the recession plus urban blight and Zoomers being a smaller generational cohort, could hamper future young adult migration to California. Anti-White discrimination, in jobs and University admissions, could also have some negative impacts on White demographics. While a lot of DEI types will likely get laid off, Whites and White men in particular, could be targeted for layoffs during the recession.  

California’s demographic dynamics are encapsulated by what an online contact told me about spending a Sunday night at John Wayne Airport in Orange County. The Terminal was filled with early 30’s White expats, flying back to their new homes in Denver, Boise, and Phoenix with their young children, most likely visiting their Boomer parents. Their flight to San Francisco was mostly older Whites and Asians.  

Source: Hail to You blog from census data.

While White demographic decline looks especially terrible from a percentage basis, it is not as bad numerically. For instance, Whites went from 76% in 1970 to about 40% today, though the youth population is closer to 30% White. Numerically, White Californians declined from a peak of about 17 million in 1990, to 14.6 million today, and are expected to hit 13.7 million by 2050. After the current exodus and big drop in the White population, from when the Boomers are gone, I don’t predict endless White decline but rather some stability. Perhaps a plateau at around 13 million, as Whites who remain will be the most resilient and adapted to California.

California is never going to return to the mass middle class society of the past. If there is going to be White population growth in California’s near future, it is going to be from the wealthy or immigrant groups, like Ukrainians. Basically, much of the traditional White American middle class demographic in California is screwed. During the recession, many areas will become much less White while certain areas might become Whiter. Regardless, most people are oblivious, besides current economic hardship, to the amount of mass disruption and dislocation, that we are going to see over the next several years.