California, the epicenter of the artificial intelligence boom, continues to grow its economy faster than the nation, but more people are losing their jobs and the cost of living remains high.

New economic indicators released this week show how the Golden State is grappling with the effects of the Iran war, as well as an AI explosion, which is driving huge investments as well as layoffs.

The state’s unemployment rate reached 5.3% in April, roughly 1 percentage point higher than the nation’s. California’s unemployment rate is expected to peak at 5.6% later this year, according to the UCLA Anderson Forecast released this week.

The state outpaced the nation in economic growth in the fourth quarter of 2025. It probably continued to outgrow the country in the first three months of this year, the report said.

“Income and output will continue to grow faster than the U.S. even as employment growth is tepid,” senior economist Jerry Nickelsburg wrote in the forecast. “Once past the current weakness, expected by the middle of next year, a tech, durable goods manufacturing, and construction resurgence should lead to superior growth in both employment and income in the Golden State once again.”

The state’s growth is being bolstered by many local companies that are attracting and spending hundreds of billions of dollars in the race to build the software and infrastructure needed for AI. However, there are signs that the same race may be leading to fewer jobs in some sectors.

From January to May, U.S. tech employers announced 123,653 job cuts, up 66% from the same period a year earlier, according to a report Thursday by global outplacement and executive coaching firm Challenger, Gray & Christmas. California had close to 77,000 job cuts across all sectors, double the number of any other state.

Although AI was cited more often than any other reason for cuts, the layoffs haven’t been as bad as the pessimists feared, said Andy Challenger, a labor and workplace expert and chief revenue officer of Challenger, Gray & Christmas.

“AI isn’t yet the jobpocalypse some predicted,” he said in a statement. “Like spreadsheets and email before it, the technology will ultimately make workers more productive.”

California has seen job growth in sectors including healthcare and social services. But entertainment, tech and manufacturing businesses have been cutting back.

UCLA’s outlook paints a mixed picture of California’s future, one filled with uncertainty as the Iran war pushes up fuel prices, inflation rises, government policy changes and tariffs disrupt supply chains.

The state is particularly vulnerable to the effect of the war on Iran because it uses pricey low-emissions gasoline, and California ports accept cargo on ships that require large amounts of more expensive oil, according to the forecast.

California also is more dependent on oil from outside the country than other states.

It’s still too early to predict the fallout from the war on Iran, but economists expect it to negatively affect employment by the end of this year and into 2027, the quarterly forecast from UCLA said. It projected that national real GDP growth would shrink from around 2.3% this year to 1.8% next year.

The UCLA report did not provide a state GDP forecast, but said early indicators suggest California continues to outperform the country. Last year, the national real GDP growth rate was around 2%, the report said. California’s was closer to 2.5%, according to data from the U.S. Bureau of Economic Analysis.

Some are concerned that AI could worsen what’s called a “K-shaped” economy, in which the rich see growth and most other people struggle with stagnating opportunities. In California, it could also lead to an “E-shaped” economy, in which low, medium and high-income people each see slight growth.

That depends on whether AI ends up helping workers or replacing them, economist William Yu said.

“If it’s labor substitution, we are going to see this [as] more of a K-shaped economy. If it’s more of labor augmentation, we’re going to see more of [an] E-shaped economy,” he said at a conference about the report.

Tech companies say they are using AI to do more with fewer people. Yu said a lot of the AI spending is going into building out AI data centers rather than hiring.

Citing data from job search website Indeed, AI appears to be slowing down growth in software, information technology, marketing and media job postings, he said. But demand for civil and electrical engineers remains high. AI might not be affecting those roles, or reindustrialization policies are boosting hiring in those areas.

The Kars4Kids jingle is back on the air in California after being ordered off the airwaves last month.

The catchy jingle that has been getting stuck in heads for nearly three decades was pulled from the air after a California man took Kars4Kids to court for false advertising.

The man said he donated an old car to the charity, believing it would be used to benefit children in need. He was unaware that Kars4Kids gives the donations to another organization, Oorah, that uses the money to fund Jewish youth trips to Israel.

The Orange County court originally ruled the jingle a violation of California’s false advertising law for failing to disclose its religious affiliations, and it was subsequently pulled from the airwaves. Kars4Kids filed an appeal, and the court has ruled the jingle can stay on the air throughout the appeals process.

“Kars4Kids applauds today’s court ruling allowing its ads to continue airing in California while the appeals process continues,” a spokesperson for Kars4Kids said. “The uninterrupted airing of its ads will enable the charity to continue funding its programs for children and families. We believe the lower court’s findings on the facts and the law were deeply flawed, and we look forward to pursuing a broad appeal of that decision.”

Kars4Kids has run into allegations of false advertising before. Oregon and Pennsylvania also took the charity to court over the misleading jingle in 2009, resulting in a $130,000 fine and a requirement to disclose its affiliations in all advertisements.

A Kars4Kids spokesperson said last month that its website clearly states its Jewish affiliation.

“We believe this case was nothing more than a lawyer-driven attempt to siphon off charitable funds for their own gain,” the spokesperson said. “The law and the facts are clearly on our side.”

The nonprofit using the funds gathered by Kars4Kids has also previously used the donations for a matchmaking program for Jewish young adults and to purchase a $16.5 million building in Israel.

While the jingle could be pulled from the air again depending on the result of the appeal, for now, it will remain a part of your morning commute in California.

Texas has dethroned California as the state with the most Fortune 500 companies.

The Fortune 500 list ranks the largest U.S. companies by revenue. This year, 57 of the top companies are headquartered in Texas, compared with California’s 56. It’s a reversal from two years ago when the Golden State had the pole position.

The Lone Star State was quick to claim the victory.

“Texas is the undisputed headquarters of headquarters,” Texas Gov. Greg Abbott said in a news release responding to the ranking, which was announced Wednesday. “The world’s leading businesses invest with confidence in Texas because of our welcoming business climate, predictable regulatory environment, and skilled and growing workforce. People and businesses are choosing Texas because Texas works.”

California’s corporate haters say they try to avoid the state’s high costs, income taxes and strict regulations, but the western state is still a top money maker.

“California dominates on nearly every other measure: its Fortune 500 companies are the most profitable ($647 billion), most valuable ($20 trillion), and employ more people than any other state (2.8 million workers),” Fortune said in a news release.

Indeed, despite the naysayers, Californian companies have been leading the world in developing artificial intelligence technology as well as the latest in space and defense tech.

The state is home to nearly 400 “unicorns,” or billion-dollar startups — more than any other state, according to CB Insights. It also gobbled up nearly two-thirds of U.S. venture capital last year, with San Francisco Bay Area startups such as OpenAI leading the way, according to the business information platform Crunchbase.

Texas and California have been in a tug-of-war for the crown. In 2024, after a decade, California bagged the top spot with 57 companies on the list, while Texas and New York tied in second with 52 companies each.

Healthcare giant McKesson, and oil companies Exxon Mobil and Chevron, were the top three Texas companies on the list. Apple, Alphabet, and Nvidia took the top positions in California.

Tesla, which relocated to Austin from Palo Alto in 2021, ranked 43rd on the list. Other major Fortune 500 companies that left California included Oracle, Charles Schwab and Chevron.

California’s population exodus has yet to fully recover from the pandemic times in 2020. The state’s high cost of living and regulatory environment are often cited as reasons for residents opting to move.

More recently, California’s proposal for a one-time tax on billionaires prompted some, including Peter Thiel and Larry Page, to open new offices outside the state.

Some smaller companies are also leaving the state, but nearly the same number are being set up. From 2011 to 2021, the state lost a net 2% of its total of around 47,000 headquarters, according to the Public Policy Institute of California.

“There is some indication of an uptick in headquarters leaving California, but it is really small in comparison to other firm trends,” said Sarah E. Bohn, vice president of the Public Policy Institute of California. “The rate of leaving is slightly higher among bigger firms.”

Bohn, in a recent report, cautioned that focusing solely on relocations overlooks the range of positive and negative forces driving headquarters activity and can misrepresent businesses’ desire and ability to operate headquarters in California and the broader impact on jobs.

Behind Texas and California was New York, home to 53 Fortune 500 companies this year. The fourth spot was tied between Illinois and Ohio, with 29 companies each.

Amazon was the top company on the list, ending Walmart’s 13-year reign at the top of the annual Fortune 500 companies list. Amazon’s 2025 revenue was $716.9 billion, compared with Walmart’s $713.2 billion.

Seattle-headquartered Amazon joined Exxon Mobil, General Motors, and Walmart as the only four companies to have ever held the top position since Fortune began publishing the data in 1955.

Together, the 500 companies on the list roped in $21 trillion in revenue and $2.1 trillion in profits last year, employing 30.5 million people worldwide.