California has a lot to crow about. In the last four years the state has accelerated to become one of the fastest growing in the nation, according to the latest quarterly report from the California Chamber of Commerce Economic Advisory Council.
Consider the recent data:
- California has added almost 900,000 jobs in the last two years—almost twice as many as the slowing, oil-dependent Texas economy.
- The regional patterns of job growth shifted a bit toward the end of the year—although we caution against reading too much into late year estimates given the sometimes sharp revisions that occur when new benchmarks are released in March.
- Inland areas have also shown some solid growth rates. The Inland Empire added more than 14,000 jobs in the last three months—a faster growth rate than San Jose.
- California also has been outpacing the nation on the basis of output. Through the first half of 2015 (the latest data available) California grew its gross output at half again the rate of the United States overall, 4.3% compared to 2.7%.
- California-produced exports slowed toward the end of the year in nominal and real terms—although the losses are smaller once prices are accounted for.
- Taxable sales are above their previous peak by a solid margin, and continue to grow rapidly.
- California’s housing market continues its strong recovery. The mortgage delinquency rate is lower in the state than in the nation overall, and home price appreciation is higher than the national average by a good margin.
- New building permits remain quite weak. California has been adding more than 4 new people to its population base for each new building permit—making the current shortage even worse.
U.S. Economy: Glass Still Half Full
If the screaming headlines are put aside and the data gets a closer look, it turns out that things are really no worse now than they were one year ago.
- While there are clearly issues that continue to interfere with the U.S. economy’s ability to get past a 3% pace of growth, on the other side of the equation, there are plenty of positive indicators suggesting that, at worst, 2016 will see growth remain in the 2 to 2.5% range.
- Looking at the fundamentals of the U.S. economy, they continue to improve at a steady pace despite turmoil in the commodity markets and issues in the global economy.
- The 2015 4th quarter advanced estimate of growth came in at a weak 0.7%, driven by weak numbers for business investment, trade, and inventories.
- Average quarterly growth for the year was 1.8%, down from last year’s 2.5%. But growth in gross output isn’t the best indicator of the economy’s health—growth in final demand is.
- Consumer spending is a particularly bright spot, being given a lift by a strong labor market, slightly easier access to credit, weak inflation figures, and improved balance sheets as a result of the real estate recovery.
- Despite issues surrounding commodities and exports, the job markets are chugging forward with almost 900,000 new positions added in the last three months of the year in a variety of sectors.
- On the industrial side of the economy things are doing fairly well despite weak numbers out of the Institute of Supply Management manufacturing index. Overall manufacturing output is up 1% from last year—weak but still in positive territory.
- The housing market continues to move slowly forward. Single-family construction starts rose to close to an 800,000 annualized pace at the end of 2016—still weak from a long-term standpoint but the best since 2007. And the outlook for 2016 is much improved.
- The trade deficit widened through 2015—although this is not because of falling exports. Overall export volumes stayed steady through the year in real terms despite the high value of the dollar.
- And despite recent wobbles in the equity markets, in reality, the financial state of the U.S. economy is solid.
