This chapter reviews the effects of the current recession on California's working people. Just before the downturn that began in early 2001, the buoyant economy, together with a bolder labor movement and progressive public policy initiatives, had begun to challenge the longer-term drift toward economic inequality that had marked the preceding decades, and even workers at the bottom of the state's income distribution made modest gains at the very end of the 1990s. That progress came to an abrupt halt with the recession, which was triggered mainly by the dot.com crash and a broader slowdown in the high-tech sector. Although the situation worsened significantly with the events of September 11, 2001, the recession was well under way in California several months earlier. Nonetheless the post-9/11 period led to extensive job losses in sectors like travel and tourism, where union density is high. More broadly, the chapter highlights the ways in which this recession has exposed the downside of the "new economy." For example, labor market flexibility helped businesses respond quickly to competitive challenges during the boom, but the temporary workers who made that flexibility possible now face not only layoffs but also limited access to public and private safety nets. This analysis suggests the continuing importance of public policies that address the issues of economic inequality and employment insecurity.