08 Jul California Productivity
“California’s record productivity was accelerated by COVID-19 over the past few months.”
Do you wonder why we have an affordable housing crisis?
Let’s start with our Golden State. It does not have a peer among developing economies for growing GDP, creating jobs, increasing household income, manufacturing growth, innovation, unquestionably producing and requiring clean energy production, and unbelievable wealth through stocks, bonds, and technology. This is underscored by Governor Newsom’s press statement that he would engage in the largest state tax rebate in America.
The state has added 1.3 million people to its nonfarm payrolls in one year. The time period April 2020 through April 2021 is remarkable. This is equal to the entire workforce of the state of Nevada. Our state easily surpassed the states of New York and Texas. Our household income increased by $164 billion, which is almost as much as Texas, Florida, and Pennsylvania combined. So, does this give you an idea that the state’s operating budget surplus, fueled by its rapidly growing economy and capital gains taxes increased to a record $75 billion?
California’s record productivity was accelerated by COVID-19 over the past few months. Revenue per employee of publicly traded companies rose to an all-time high of $1.5 million in May which is 63 percent greater than a decade ago. The remaining states’ performance was nothing special. In fact, the other states’ economic index, referred to as the Russell 3000 Index which is made up of large and small companies, really did not change much over the past 10 years.
Many people have claimed our state to be bad for business but in reality job performance, GDP, wealth, job growth, and many other factors belie the Investor demand; using the weight of the benchmark of the S&P 500 Index increased three percentage points since a year ago. This is the highest increase among all states. Even credit usage was incredible with the weight of corporate bonds sold in the state raising the most of any state to 12.5 percentage points from 11.7 percentage points according to the Barclays US Corporate Bond Index. So, what can we conclude? Investors had high levels of confidence in California companies during the pandemic.
And another measure of economic strength is the state’s gross domestic product increased by 21 percent during the past five years, which far out produced the No. 2 states, New York (14 percent) and Texas (12 percent). The gains added $530 billion to the state and 30 percent more than the increase for New York and Texas combined. To put it in another perspective, it was the equivalent to the entire economy of Sweden. California outperformed the U.S., Japan, and Germany with a growth rate that was exceeded only by China.
California’s base in factory jobs gained 13 percent over the past five years to $315 billion in 2020 which was far more than any of the ten largest manufacturing states. Texas was No.2 with nine percent growth and Indiana at eight percent.
Corporations are also the undisputed leaders in renewable energy. Twenty-six companies are worth $897 billion or 36 percent of the U.S. industry. No other state can claim that 21 percent of the electricity derived is from solar energy. Shares from these companies increased by 282 percent during the past 12 months. The com panies also increased their workforce by 35 percent since 2019 almost triple the rate for the rest of the United States and four times the global rate.
Water shortages and wildfires have devastated the state. It seems as if that is the continual topic of conversation. The state GDP equivalent of $40.2 billion is derived from agriculture, forest, and hunting last year. That is greater than the next largest states of Iowa, Washington, Illinois, Texas, and Nebraska combined.
Economic disruptions caused by COVID-19 were interesting. We were the No. 1 state for global trade with Los Angeles and Long Beach ports seeing the growth that exceeded all the U.S. rivals for the first time since 2020.
Investing in California marches on. And so, the legislature and the Newsom Administration should capitalize on growth and wealth. They, among other things, should not punish rental property owners, agents, the millions of personnel, and businesses that serve the industry, nor should they dissuade capital investment providing rental housing by enacting incredibly harmful new or revised laws.
Our next article will focus on changes to the Emergency Rental Assistance Program (ERAP). Hopefully, the legislature recognizes property owners need to be renumerated, and to do that requires structural changes to the ERAP.
Ron Kingston may be reached at [email protected]