How California Regained Title of World’s 5th Largest Economy
Friday, May 11, 2018
California has regained its lofty perch as the world’s fifth-largest economy.
Last year’s ranking — using the gross domestic product yardstick — is another example of the state’s revival from the financial pain inflicted by the Great Recession. By this math, California’s economy has rebounded from its post-recession standing low set in 2012 when it ranked as just the tenth-largest economy on the planet.
This isn’t just about a mythical scorecard showing the huge scope of the state’s economy. The turnabout in the business climate — by no means perfect, but a reversal that stunned doubters — has created job opportunities, boosted salaries, overheated real estate markets and lifted numerous Californians out of poverty.
To find out what economic sectors helped get California’s economy back in high gear, I filled my trusty spreadsheet with some detailed GDP stats from the past five years. I learned the state’s overall economy grew by $429 billion — after inflation — to $2.75 trillion. That’s an average 3.5 percent annual expansion pace since ’12 vs. negligible 0.1 percent-a-year increase during the recession-scarred 2007-2012 period.
And what powered that resurgence was not terribly surprising: smarts (technology) and beauty (real estate).
So, here are six California business output trends you should know, based on slices of the state’s economy and after-inflation growth. (That’s “chained” or “real” GDP for economics students!)
- Very capitalist: Private industries powered the turnaround by upping their contribution to California output by $404 billion in the past five years — that’s growth at a 3.7 percent annual rate — to a $2.42 trillion, or 88 percent of the state economy. The output of various government enterprises jumped by $24 billion since 2012 — or 1.5 percent annual growth — to $329 billion, or 12 percent of California GDP.
- Big got bigger: California’s largest sectors were in growth mode. Its biggest trade is the real estate business — that’s selling, renting and managing property assets — with $467 billion of output in 2017. That’s up 3.4 percent annually since ’12. Next comes manufacturing at $300 billion in ’17, up at a 4.1 percent yearly rate. Information — such as the geeks who run Google and Facebook — was a $240 billion industry, growing at a 9.2 percent yearly speed since ’12. The white-collar office crowd — aka “professional, scientific, and technical services” — created $227 billion in value last year, after rising 2.7 percent a year since ’12. And health care and social assistance was good for $172 billion and averaged 3.7 percent gains the past five years.
- Biggest contributors: Which niches gave the largest boost in dollars? Tops were the information trades which boosted output by an inflation-adjusted $85 billion. Second was the real estate trade, up $72 billion since 2012. Next was California’s factories. Yes, manufacturing added $54 billion. Then came healthcare/social assistance and the professional-scientific-technical services” — each adding $28 billion.
- Fastest growers: Which industries grew at the highest average annualized rate since 2012? No.1, again, was information at a searing 9.2 percent yearly pace — basically, triple the state’s overall expansion pace. No. 2 was the boss world — “management of companies and enterprises” — up 6.4 percent a year. Next came the farms — “agriculture, forestry, fishing, and hunting” — jumping 5.8 percent per year. That delayed-but-need building boom added up to construction growing 5.2 percent annually. And the revival of our tourism culture boosted “accommodation and food services” output by 4.8 percent a year.
- Small losses: Not every industry grew, but the laggards weren’t big players. Folks who dig up valuable stuff — mining, quarrying, and oil and gas extraction — saw output fall by $6 billion to $10 billion. But it’s just 0.4 percent of the state economy, and falling energy prices didn’t help. And finance and insurance, still feeling post-recession impacts in the lending business, fell by $6 billion to $129 billion. The money business is 4.7 percent of California output.
- It’s not just GDP: Other California business metrics displayed equal improvements during the past five years. Bosses statewide added jobs at a 2.6 annual pace so the jobless count was halved by 997,000. Per-capita incomes rose at a 3.8 percent annual pace. Home-prices soared 9.5 percent per year. Meanwhile, the state’s population grew at a 0.8 annual pace since 2012. And the so-called “supplemental” poverty rate — math that includes regional variances in the cost of living — shows 997,000 fewer Californians living below the poverty line in 2014-2016 vs. what was reported for the 2010-2012 at the Great Recession’s end.
Source: The Mercury News
Category: Economic Development