It isn’t any exaggeration to say that California's economic slowdown is due largely to the downturn within the technology sector.
Let my trusty table provide some context by the statistics on state-level gross domestic product, a broad measure of business performance. Consider probably the most recent reports – the slowdown of the primary quarter of 2024 and the last three months of 2023 – in comparison with the boom of the past five years.
Overall, California's GDP has grown by a median of two.2% recently, in comparison with 3.3% between 2019 and 2023. This is a much larger fluctuation than in the remaining of the country: US GDP grew by 2.4% within the last two quarters, barely slower than within the previous five years (2.6%).
Next, consider the changing list of things that determine California's business climate, specializing in how much key industries contribute to or detract from economic growth.
Let's take a have a look at what we call “information” – the creators of cutting-edge products and astronomical salaries. This industry is dominated by technology firms, but in addition includes groups just like the creative talents of Hollywood.
These firms grew by about $35 billion a 12 months during California's five-year economic boom that ended last September, nearly a 3rd of the national growth. Over the past six months, the data sector shrank by $3 billion a 12 months.
No surprise. We've seen headline-grabbing layoffs at California's tech giants. Hollywood production hasn't recovered from labor unrest either.
The dark side
In California's quirky and dynamic economy, ups and downs are nothing recent. Take a have a look at three other notable dips.
Production at California factories of “durable goods” — long-lasting products starting from aircraft parts to household appliances — grew by $11 billion annually through the five-year boom. This 12 months, it has fallen by $5 billion compared with the last two quarters.
The variety of “professional, scientific and technical” jobs – well-paid office jobs – grew by $21 billion a 12 months through the boom, a fifth of the full. But within the recent slowdown, growth slowed to $8 billion a 12 months.
And growth in the actual estate and rental and leasing segment – the individuals who broker real estate transactions – shrank by three-quarters to $3 billion through the slowdown. High mortgage rates, which the Federal Reserve is using to chill the country's overheated economy, were key to the slowdown.
Adding these numbers together, the full growth of this suddenly sluggish quartet of industries has risen to $2 billion a 12 months over the past two quarters, up from a rate of just $78 billion through the five-year boom.
This is sort of a setback, especially considering that salaries in these industries are lavish.
The downside
How has California grown recently?
Let's start with the federal government's contribution to economic growth. This spending has increased by $11 billion annually over the past two quarters, in comparison with just $3 billion through the five-year boom. However, the massive budget deficits of many California governments suggest that this spending surge is prone to slow.
Or take a have a look at three industries that will finally give you the chance to shake off their corona cobwebs.
Retail growth has been $16 billion a 12 months over the past two quarters — nearly a fifth of the national total and nearly thrice faster than through the five-year boom. Can aggressive consumer shopping proceed to spice up the economy — nationally or across the country?
Construction also rebounded, growing by $10 billion over the past two quarters. That's a remarkable rebound from the $2 billion annual decline because the pandemic limited production and expensive mortgages dampened output. Massive infrastructure projects – and the state's hunger for housing – should keep the development industry lucratively busy.
And then there's agriculture, which recently grew by $12 billion a 12 months after previously shrinking by $2 billion a 12 months. Higher food prices – have you ever been to the supermarket these days? – may be good for business.
This revitalized quartet grew by $49 billion annually during the last two quarters – almost ten times the expansion through the boom.
It must be noted that work in these 4 industries is less glamorous and lower paid than within the previously mentioned struggling industries.
Jonathan Lansner is a business columnist for the Southern California News Group. Reach him at jlansner@scng.com.
Originally published:
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