Good news may be on the horizon for California’s economy – that is, if historical patterns are an indicator of future progress, according to the Public Policy Institute of California (PPIC).
According to the PPIC’s Statewide Survey (September 2009), 67 percent of Californians expect “bad times” for the state’s economy in the coming year. But despite the recession and mortgage crisis, California boasts strong economic fundamentals that will help the state rebound over the long term, says a recent Public Policy Institute report on the state’s economy.
“Armed with the right economic measures and a realistic sense of the state’s strengths and weaknesses, Californians can build a brighter future,” says Jed Kolko, Ph.D., Associate Director and Research Fellow with the Public Policy Institute and author of the California Economy report.
For example, California tends to get a bad rap when it comes to business climate due to high taxes and regulatory costs. Yet other factors influencing business climate in the state – including a highly skilled workforce, the availability of capital to expand and support businesses, and attractive cultural amenities – are quite positive.
The report examines the seeming paradox between the state’s higher-than-average unemployment rate compared to its high employment growth rate, explaining that the growth of its labor force is on par with the nation, but can’t keep up with the growth in the state’s population. Hence, the state’s unemployment rate will likely remain high even after this economic downturn reverses.
Manufacturing, which accounts for less than ten percent of the state’s economy, is expected to continue its decline. Industries that play a larger role in California’s economy – including professional services, administrative services, education and health care – have not been as adversely affected by the recession and are projected to experience robust growth in the years ahead.
California’s employment trends are expected to be uneven, with the highest growth in the labor force likely in inland regions of the state.
The report offers four principles as a framework in which to assess the state as it moves into recovery mode, including taking a balanced approach to the business climate and focusing on the “right” economic measures. But its overriding assertion: Be patient.
“Despite the state’s frequent booms and busts, historical patterns are the best guide to California’s economic future,” Jed Kolko says in the report. “Economies tend to return to growth rates and unemployment levels established over the long term, and major industry shifts… can take place over decades.”
PPIC is a non partisan public research organization, focusing on a wide range of policy issues – from government to economic development, immigration, health care, transportation, housing and more – in the State of California.