Uneasy balancing act for CA economy

California FlagCalifornia headed into 2016 with a stabilizing economy that nonetheless left many residents uneasy.

On the work front, the year finished out with weaker, but not alarming, numbers. “California employers added just 5,500 jobs in November, according to federal data — a significant slowdown from more robust monthly gains earlier in the year,” the Los Angeles Times reported. “But the state unemployment rate continued its five-year-long decline, dropping to 5.7 percent in November, the lowest in eight years.” By way of comparison, the nationwide unemployment rate has been hovering around 5 percent.

For a broader view of the economy, analysts looked to other factors. A string of reports reinforced the significance of Silicon Valley to the state’s health, although “red tape, high taxes and a burdensome cost of living” continued to dog Californians statewide, according to the San Jose Mercury News. “In one report, prepared by Beacon Economics for nonprofit group Next 10, a comprehensive look at California’s business climate determined that the Golden State is considerably more hospitable to business than suggested by conventional wisdom that sometimes elevates less costly states such as Texas,” the paper noted. “Another study, the Milken Institute’s annual Best-Peforming Cities Index, found that the San Jose metro area, which includes most of Santa Clara County, is the top performer for 2015.”

Two Californias

The analyses helped paint the picture of a state increasingly divided between a relatively prosperous coast and a more struggling interior. “By about 2 to 1, Californians believe the state is split between haves and have-nots, with slightly more people putting themselves in the latter category,” according to a survey reported by the Times and conducted by the Public Policy Institute of California. “Just fewer than half of Californians believe that the state will experience good economic times in the next year, but 41 percent say the economy will suffer tough times.”

Even cities just a few hours’ drive from Silicon Valley have limped toward recovery in the wake of the Great Recession. “Stockton, Fresno and Modesto were among the country’s 10 weakest performing metro regions in 2009, according to a Brookings Institution study, and in parts of the Inland Empire, 1 out of 75 homes was in some state of foreclosure — the fourth-highest count in the nation,” as the San Francisco Chronicle reported. “While the Bay Area was by no means spared from the recession, the impacts weren’t as stark. All counties in the region recorded lower employment losses than Los Angeles, San Bernardino and Riverside counties. A third of the counties in the Bay Area fared better than San Diego and Orange counties.”

Doubling down

Critics have warned that undue reliance on the seaboard, and on Silicon Valley in particular, would have risky distorting effects on policymakers’ views and deeds. Setting aside Silicon Valley and the Bay Area, for instance, “the Golden State’s employment growth between 2009 and 2014 and real gross domestic product per capita between 2009 and 2013 each drop about 2 percentage points,” as the Hoover Institution’s Carson Bruno observed. “This is a 55 percent reduction in economic growth and a 25 percent cut in employment growth for California without this one region.”

Thanks to the region’s dominance, the Golden State’s budgeting has become increasingly captive to its tax base. “California’s budget is currently in a strong position because of a surge in tax collections, specifically personal income tax collections,” Bruno added. “Without the Silicon Valley-Bay Area, average assessed taxes per capita would have dropped $249 per year since the Great Recession ended or the equivalent of approximately $7.9 billion per year. That is the difference between budget surpluses and budget deficits.”

California’s coastal metropolises have proven especially exposed to the ups and downs of international markets — especially China, where a weakening economy has broken the state’s run of record-setting exports. “California shipments to China in the August-to-October period fell by 11.4 percent, from $4.19 billion last year to $3.71 billion in 2015,” the Sacramento Bee noted. “Shipments declined across the board, from computer equipment to agricultural products.”

6 comments

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  1. Rex the Wonder Dog!
    Rex the Wonder Dog! 30 December, 2015, 12:35

    “The analyses helped paint the picture of a state increasingly divided between a relatively prosperous coast and a more struggling interior. “By about 2 to 1, Californians believe the state is split between haves and have-nots, with slightly more people putting themselves in the latter category,”
    Only Tech people in Silicon Valley-working 100+ hours weeks- and GED government trough feeders are doing good in CA.

    That is it.

    Reply this comment
    • Rex the Wonder Dog!
      Rex the Wonder Dog! 30 December, 2015, 12:41

      “Setting aside Silicon Valley and the Bay Area, for instance, “the Golden State’s employment growth between 2009 and 2014 and real gross domestic product per capita between 2009 and 2013 each drop about 2 percentage points,” as the Hoover Institution’s Carson Bruno observed. “This is a 55 percent reduction in economic growth and a 25 percent cut in employment growth for California without this one region.”

      Wow, I did not even see this before I posted.

      There you have it, take out Silicon Valley and we are NEGATIVE. Silicon Valley is what has made CA the last 20 years, just as Southern CA military spending made CA in the 1980’s…military spending did not last, and neither will tech. In fact with all the H-1B VISA’s being gifted out by the Feds, undercutting American workers, I would submit Tech has already dropped substantially.

      Reply this comment
  2. Rex the Wonder Dog!
    Rex the Wonder Dog! 30 December, 2015, 12:50

    “But the state unemployment rate continued its five-year-long decline, dropping to 5.7 percent in November, the lowest in eight years.”

    Please, we ALL know the U-6 UE rate has been over 15% since 2007, and over 20% for 6 of the last 8 years. And the “new jobs” being created are of the low paying/no benefit jobs in retail, hospitality and food service. No new construction OR manufacturing JOBS AT ALL….those are the two job sectors that drive the middle class.

    Trump is the ONLY politician who even refers to this bogus manipulation of the UE rate numbers put out by the Feds…..

    Reply this comment
  3. Richard Rider
    Richard Rider 30 December, 2015, 13:13

    Even the good news in Silicon Valley might be fading. To the degree our employment is growing the state, it’s primarily in the modest income service industries, while the employment LOSSES heavily weighted in the much higher paying tech areas.

    Consider this part of the latest unemployment report cited in the article:

    Biggest gains were in Retail Trade (8,200; $33.4k average annual salary), Educational Services (5,900; $48.3k), and Accommodation & Food Services (4,400, $21.2k).

    Biggest declines were in Information (-9,300; $152.9k), Other Services (-2,900; $35.4k), and Professional, Scientific & Technical Services (-2,500; $114.8k). All salary numbers are from Q1 2015 Quarterly Census of Employment & Wages.

    Reply this comment
  4. Queeg
    Queeg 30 December, 2015, 17:54

    No doubt….the Visigoths are gaining and will come!

    Reply this comment
    • ricky65
      ricky65 31 December, 2015, 09:34

      Not sure if the Visigoths are gaining ground but based on the crime rates in the cities, it appears the ‘Vandals’ have already arrived.
      Thankfully, Emperor Nero in Rome-on the-Potomac has assured the citizens all is well.
      While it is true he will no longer send the legions to fight our enemies at the gates he has proclaimed there will be free bread and circusses for the people. Non-citizens will be served first.

      Reply this comment

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