California Economy

August 26, 2013

Poverty in California

California has more citizens in poverty = 6.1 million, and more children in poverty than any other State. California also has the highest percentage of its population living below the poverty line. According to a new type of Census Bureau calculation that takes into greater account cost of living, California now has a poverty rate of 23.5 percent.

The Public Policy Institute of California has released a statistical analysis of the issue of poverty in California. Among it findings were that poverty rates continue to soar in the aftermath of the Great Recession but have not yet reached the peak of the 1990s Latinos and African Americans have higher poverty rates than other groups and poverty varies widely in with education level. In addition, most poor families in California are working and poverty varies greatly across California’s counties.

A chart was produced that shows the poverty rates in most California counties. Four countries: Merced, Tulare, Imperial and Fresno have poverty rates over 25 percent, and another seven counties have poverty rates over 20 percent. The full report can be read here.

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August 20, 2013

Is Cisco shrinking?

What was once one of California’s brightest stars seems to be having a diminishing impact on the California economy. Cisco recently announced that is will be firing 4,000 employees, even though it has been growing at a good clip and seems financially healthy. As reported by Business Insider, with this most recent announcement, the company has shed 12,000 jobs in just the past two years alone:

“This isn’t the first layoff that Cisco announced this year. In March, a mere five months ago, Cisco said it was firing 500 people. Prior to this new round of 4,000 firings, Cisco had cut 8,000 jobs. So that’s 12,000 jobs gone in the two years since Cisco’s CEO John Chambers began his turnaround”

Cisco employs 74,135 employees worldwide with about 17,496 work in California – mostly in the company’s Bay Area headquarters in San Jose, so this “workforce reduction” represents about five percent of Cisco employees. Little explanation was given, According to a statement given to a Business Insider reporter by a Cisco spokesperson:

“During the earnings call on Aug 14th, Cisco announced actions to align resources to our top opportunities, balance expenses to revenue, drive efficiencies in the business, and invest in growth. These actions include prioritizing R&D, aligning new and existing talent to growth areas and a workforce reduction impacting approximately 4,000 employees, or ~5% of our workforce.”

They also quoted CEO John Chambers as giving the reason for the move in a call with analysts. “We just have too much in the middle of the organization,” he told them.

While this is obviously not good news for the California economy or for the Cisco employees, in financial terms the company is doing quite well. For the fourth quarter, Cisco reported $2.27 billion in profit, up from $1.92 billion, for the year-earlier quarter and revenue was up 6% to $12.42 billion from $11.69 billion.


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August 13, 2013

California Exports Over $15 Billion in June

California exports held flat in June, the most recent month when such statistics are available, but given the problems in many economies this is considered to be a respectable number.

California businesses shipped merchandise valued at $15.23 billion in June, according to an analysis of U.S. Commerce Department figures by Beacon Economics. That is up an insignificant 0.3 percent from $15.18 billion in June 2012. “June was another of those ‘apparently up but actually down’ months,” says Jock O’Connell, Beacon Economics’ International Trade Adviser. California’s exports of manufactured items rose from $9.71 billion last June to $9.81 billion this June. Meanwhile, the state’s exports of non-manufactured goods also edged up, from $1.59 billion to $1.64 billion.

According to their report, the data revealed some a few other interesting facts. “While it may seem counter-intuitive, California’s merchandise export trade with Europe has been up nearly 13% over the latest three months,” O’Connell says. By contrast, the state’s exports to the Far East declined by 3.2% during the same period, despite a 16.9% jump in the value of shipments to China.

The Beacon analysis noted that the year-over-year increase was basically canceled out by inflation, the June numbers were up substantially from shipments valued at $13.25 billion in May this year. With imports, California took in $32.03 billion in June, down about 1.3 percent from $32.47 billion in June last year. Since many goods entering California go to other states, so exports are generally considered a more accurate measure of the state’s international trade, which seems to be holding steady.

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August 1, 2013

California could reap gains from immigration reform

The University of Southern California has release an analysis of immigration reform that suggests that authorization and citizenship for undocumented immigrants could lead to improvements in the state’s economy. The analysis reviewed two studies: a report by the Center for the Study of Immigrant Integration (CSII) that estimated that immigration reform would pump about $4.6 billion into California’s economy, and a report by the Center for American Progress that estimated about 8 billion would be added to the California economy through immigration reform.

While small compared to the total size of the California economy, there is thought to be a multiplier effect as these many of new citizens will be of lower income and will be more likely to spend their paychecks than to save them. According to the report, social issues should also be considered: “children of undocumented parents face greater barriers to accessing social services and programs and tend to have more negative social, economic and health outcomes.” About 1.5 million children in California live with at least one undocumented parent, which is an amazing 16% of children in the state.

In order to possibly curb the negative social, economic, and health outcomes these children tend to face, the report emphasized that the state should begin by legally incorporating their parents and reforming immigration law in a way that that grants them greater economic opportunities. The Study concluded that immigration reform could economically benefit both the undocumented immigrants and the state’s they call home. The full report can be read at this link:

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July 31, 2013

Microbusiness is a major job creation engine in California

Small companies in California have had a far greater impact on job creation than previously estimated, and this has been going on for an number of years. According to an analysis issued by Small Business California, businesses with less than five employees, sometimes called “microbusinesses”, were the state’s main engine of job growth between 2003 and 2010. These firms added 719,729 positions over that time period, while all other small businesses lost a combined 460,368 jobs during the same time frame.

California’s microbusinesses added jobs even during the depths of the recent recession, creating 120,818 positions between 2008 and 2010. Larger businesses, including firms with more than 500 workers, lost a combined 1.02 million jobs in those years. The report was based on an analysis of data from the U.S. Small Business Administration, Office of Advocacy and can be viewed at this link

It is possible that the role of microbusiness has been far greater than previously estimated and this should provide some serious food for thought for economic development professionals and those responsible for business policy formation in California.

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October 22, 2012

China investment in California predicted to soar

China’s direct foreign investment in developing economies is on the increase, and California could be uniquely situated to benefit from this, according to a report by Rhodium Group, a New York based economic think tank.

Already, about $1.3 billion of Chinese money has flowed into the California from 2000 to 2011, and this amount to increase to between $10 billion and $60 billion by the year 2020. “Just as Chinese exports exploded in the last decade—from $250 billion in 2000 to nearly $2 trillion by 2011—China’s OFDI is poised to skyrocket in the years ahead”, according to the report.

It went on to conclude. “California, with its long history with China, the most sizable Chinese American population in the country, and more inward investment deals from China than any other state, is in a position to lead the nation in attracting Chinese investment in the decade to come”. The full report can be downloaded from a link on this page:

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January 25, 2011

California Unemployment still going up – now at 12.5 percent

The California unemployment rate rose to 12.5 percent in December, up from 12.4 percent the previous month, The Los Angeles Times noted. California’s unemployment rate is now among the highest in the country, trumping the national unemployment rate by nearly 2 percent. California employers added just 4,900 jobs in December, the Employment Development Department reported, after adding 30,500 the month prior. The biggest losses were seen in the government sector, which shed 15,400 jobs. Overall, California has added a total of 87,500 jobs in 2010. The openings came mostly from professional and business services; education and health; and leisure and hospitality. Although the additions are not enough to lower the unemployment rate, it is an improvement compared to 2009 when the state lost 836,000 positions.

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January 21, 2011

UCLA Forecast cautiously optimistic about California Economy

Economic activity is increasing across a number of important sectors in California, according to the latest UCLA Anderson Forecast for California. The outlook for an expansion of the workforce shows momentum building into 2012, according to economic models presented by UCLA Professor and Senior Economist Jerry Nickelsburg. He suggested that statewide unemployment would drop to 11.4% by the end of this year and 10.3% in 2012. It is presently, 12.4% “The forecast also suggested that the unemployment rate for some of the hi-tech driven coastal communities could fall as low as 8.5% next year, and to 7.4 percent in 2012.” Professor Nickelsburg reported that job creation has been positive, especially in coastal California, for much of the calendar year, while inland communities are still under high unemployment pressure. However, job creation still remains below levels expected in a well-functioning job market. Even with a large deficit, looming record pension debt, and high unemployment, “California is economically much better off than the 10 most populous states – maybe even Texas,” Nickelsburg also indicated that the data does not support the mass exodus of businesses to other states outside California, which is suggested may be a myth.

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January 13, 2011

California Exports Surging, but not adding to Job Growth

In November, Calilifornia posted its 13th consecutive month of year-over-year increases in export trade according to Beacon Economics, which analyzed foreign trade data from the U.S. Commerce Department. California businesses shipped abroad in November $12.49 billion in goods, exceeding by 14.1 percent the $10.95 billion shipped in November 2009. It was California’s best November ever in inflation-adjusted terms, Jock O’Connell, Beacon Economics’ international trade adviser, said in a news release.

The good news was tempered somewhat by the fact that California did not quite keep pace with the nation as a whole which boosted its merchandise exports by 19.4 percent. Also, California has a relatively high percentage of re-exports, which are items previously imported into the United States that have had no significant value added prior to being shipped abroad. “California’s numerous trading companies do a superb job sourcing goods from around the world and matching them with foreign customers,” O’Connell said. “That’s why California’s re-export trade leaped by 36.3 percent in November.” Exports of goods manufactured in California, meanwhile, increased just 6.7 percent. Overall U.S. manufactured exports, in contrast, jumped 16.7 percent, O’Connell reported.

California made up 11.1 percent of all U.S. merchandise exports in November, but just 9.6 percent of its manufactured exports, Beacon reported. California’s exports of nonmanufactured goods represented 12.4 percent of the nation’s exports of those goods, but fully 19.8 percent of the nation’s shipments of re-exported goods came from California.

As a result, California’s export trade has a less immediate positive impact on the state’s economy and on its propensity for job creation, O’Connell said. “California manufacturers have become exceptionally efficient in increasing output without adding new hires,” O’Connell said in the release. “And the goods they produce tend to be of increasingly higher value. That’s why it is possible for the value of our manufactured exports to rise without there being a commensurate level of job growth.”

That also explains why California lost 4,400 manufacturing jobs between November 2010 and November 2009, based on seasonally adjusted numbers from the California Employment Development Department, despite California adding 110,900 jobs overall, O’Connell said.

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April 5, 2010

California’s Exports moving up

Could exports lead California out of the recession?  There is at least a glimmer of hope in a an analysis of federal trade data by the University of California Center Sacramento.  According to a report in the Los Angeles Times, The $10.3 billion in goods shipped abroad in January represented a 18.5% increase over the $8.7 billion recorded during the same month last year. The products shipped by land, sea and air included high-end, top-value items such as civilian aircraft engines and parts. They also included low-value bulk, such as scrap metal and paper that will become the raw materials for new goods manufactured in Asia.  “We are now just getting back to the level of exporting we were at in early 2007, before the global financial and economic crisis sent international trade spiraling down,” said Jock O’Connell, the UC center’s international trade and economics advisor. 

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February 3, 2010

Sony Pictures to lay off 450

Sony Pictures Entertainment Inc., based in Culver City, will be laying off about 450 people and eliminating 100 open positions to cope with declining DVD sales. Most of the cuts at the studio will occur by the first week of March and will be in the home entertainment and information-technology units in the United States.

The company, a subsidiary of Japan’s Sony Corp. also cut back last March, when it laid off nearly 250 people and eliminated nearly 100 open positions. Company staff was informed of the latest cuts in a memo Monday and through videos by the studio co-chairs on an employee Web site. “Our industry is affected by two things: It’s affected by the economy, of course, and it’s affected by technology,” co-chair Amy Pascal says in the video. “Over the last two years, it’s changed people’s DVD buying habits, which has had a huge effect on our company and the industry at large.”

The home video market has been declining as people have not been buying videos as often, and instead turn to rentals, which are far less profitable for the industry.

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December 9, 2009

UCLA Anderson Forecast: Double digit unemployment to continue

The UCLA Anderson Forecast for the third quarter of 2009 has just been released, and says that while this huge recession may have ended, unemployment will stay in double digits and the “negative impact of the downturn will last well into the next decade”. Unemployment going to get worse and is expected to rise to 12.7 percent in the fourth quarter of 2009. Though the economy will be growing in 2011, it will not be generating enough jobs to drive the unemployment rate below double digits until 2012. Economist Jerry Nickelsburg called the unemployment situation “ugly” and will remain so for some time to come. “More rapid growth than can be expected over the next twelve months would be required to bring the unemployment rate down,” he said.

There is one possible silver lining in all these dark clouds, however – exports may be improving. According to Nickelsburg, “In trade and manufacturing, there is new evidence that demand for California-produced goods is increasing. He believes that the keys to the California recovery are exports of manufactured and agricultural goods, a recovery in U.S., increased public works construction and increased investment in business equipment and software.

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September 7, 2009

California loses 127,000 Manufacturing Jobs

California was the second-largest loser of manufacturing jobs — 123,400 — over the past year, according to the U.S. Bureau of Labor Statistics. Only Ohio lost more more jobs than the Golden State: 127,000. A report by the Milken Institute released earlier this summer reached a similar conclusion, but noted that the state is hemorrhaging high-tech manufacturing jobs at an even higher rate than in traditional manufacturing industries. California’s employment in this high-wage, high-skill segment is down 23 percent from 2000 levels, as opposed to declines nationally of 19 percent and the peer states’ average of 16 percent. In fact, from 2003 to 2007, encompassing the recovery of the high-tech sector, the peer states gained 24,000 high-tech manufacturing jobs while California lost almost 16,000.

“Widespread misconceptions about the manufacturing sector in California are part of the problem,” said Perry Wong, senior economist and one of the authors of the report. “People don’t understand that manufacturing is an integral part of the high-tech and clean-tech economy. If Californians want to build the future economic recovery on high-tech and retain highly skilled workers, they have to address the underlying issues of this sector now.”

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September 1, 2009

Los Angeles loses most jobs in U.S.

Los Angeles was the nation’s biggest loser in employment during the past 12 months, according to figures released by the U.S. Bureau of Labor Statistics. The Los Angeles area lost 240,100 jobs between July 2008 and the same month this year, the biggest decline in raw numbers anywhere in America. The second biggest losers were the Chicago and New York City markets with losses of 206,200 and 157,900 jobs, respectively.

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June 24, 2009

California jobless rate hits 11.5 – biggest in State history

California’s unemployment rate climbed to 11.5 percent in May, the highest in modern record-keeping, the U.S. Department of Labor has reported. Last month, California lost 68,900 jobs, and in the past 12 months a staggering 739,500 jobs have disappeared from the state. If you include part-time workers seeking full-time work plus workers who have given up looking for traditional employment, the jobless rate could be as high as 25 percent, exceeding the national unemployment levels in the worst part of the Great Depression. Economists project that the layoffs will continue to rise at least through the end of this year and probably into 2010, even if the economy starts to recover.

Most of the cutbacks came from government: 11,400 job cuts in federal government and 2,800 from state and local agencies, as municipalities scaled back their services to cope with the crippling effects of tax declines and budget cuts. Adding to the decline in government employment, every major job category lost jobs in May except for education and health care, which added 2,100. Construction companies cut 11,300 positions; manufacturing, 10,400; professional and business services, 10,900; retail, wholesale, transportation and utilities, 8,300; leisure and information, 8,100; and hospitality, 2,700.

As shocking as these numbers are, what is even more shocking is that the State Government doesn’t seem to be doing anything about it, as they are mostly concerned with their own survival. Early indications are that the Obama administration stimulus money is going mostly to save the jobs of existing State workers and bureaucrats, who are already doing relatively well. Very little of the funding seems to be going into job creation, economic development or innovative programs to help small business.

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June 16, 2009

U.S. refuses California emergency financial assistance

The Obama administration has refused requests for emergency assistance from senior State government officials. Calling California, “one of the biggest remaining threats to the economy” the Washington Post reported that top state officials have gone hat in hand to the administration, armed with dire warnings of a fast-approaching “fiscal meltdown” caused by a budget shortfall. Concern has grown inside the White House in recent weeks as California’s fiscal condition has worsened, leading to high-level administration meetings. But the Post reported that federal officials are worried that a bailout of California would set off a cascade of demands from other states. The administration is also concerned that California will enact massive cuts to close its deficit aggravating the state’s recession and further dragging down the national economy. After a series of meetings, Treasury Secretary Timothy F. Geithner, top White House economists Lawrence Summers and Christina Romer, and other senior officials have decided that California could hold on a little longer and should get its budget in order rather than rely on a federal bailout.

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June 15, 2009

Global recession batters California’s ports

California’s ports are getting quieter and the state’s huge export slump is getting worse. According to a report in the Sacramento Bee, exports from California fell 25.5 percent in April from a year earlier, figures compiled Wednesday by Sacramento trade consultant Jock O’Connel reveal. The shipments from California’s ports, totaling $9.25 billion, represent the worst April in four years. Earlier this year, exports were falling at about a 20 percent rate. O’Connell said the new figures show a turnaround is a ways off despite signs on the national level that the economy might bottom out soon. O’Connell told the Bee that the export decline was widespread. The volume of cargo leaving the ports of Los Angeles and Long Beach was off 18 percent. Exports from San Francisco International Airport fell 34 percent. For the state, April marked the sixth straight month of declining exports. O’Connell added that imports at California’s ports fell 28.5 percent, demonstrating the global spread of the recession.

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March 26, 2009

Huge demand for California bonds

The Sacramento business journal is reporting “huge” demands for California bonds: Investors were more enthusiastic about buying California debt than expected, putting in orders for $6.54 billion in general obligation bonds in a sale by the state Treasurer’s Office that ended Tuesday State officials had expected to sell $4 billion. The extra cash will allow officials to restart more stalled projects that were halted in December due to the state’s cash crisis. Treasurer Bill Lockyer’s office said there was “huge” demand from both individual investors and institutional buyers such as mutual funds. Officials have not determined which of 5,300 halted projects should be allowed to proceed. Until this sale, the tight credit market and the state’s prolonged budget crisis kept California out of the bond market for nine months.

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UCLA Forecast says National Recovery depends on World Trade

The UCLA Anderson Forecast, an economic think tank, has linked the current national recession to slumping international economic conditions that will impact the timing and pace of any national recovery. The Forecast asserts that a turnaround in the U.S. economy depends upon a recovery in world trade. The report also states that regardless of the steps taken by the U.S. government, national solutions will not be enough to restore growth and therefore global solutions are essential. In California, it’s forecasted that the economy will remain in turmoil for the foreseeable future as the twin sector engines of consumers and construction continue to drag, according to a press release that summarized the report.
More on UCLA Forecast says National Recovery depends on World Trade

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March 25, 2009

California ranked worst place for business

California came in dead last in a national ranking of the best states to do business, according to Chief Executive magazine. Finishing just ahead of California in the 2009 rankings were New York, Michigan, New Jersey and Massachusetts. Texas was ranked first.  The magazine evaluated states on natural resources, regulation, tax policies, quality of living, education and infrastructure, among other categories. Chief Executive magazine said states that perform well in the rankings tend to have lower taxes and little unionization. California ranked 48th in “cost of business” and “business friendliness.”

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