The broadest measure of business output shows how far the pandemic sunk California’s economy — what was one of the nation’s hottest business climates in 2019 suffered the seventh-weakest rebound this summer.
New gross domestic product results from the U.S. Bureau of Economic Research show the state remains the nation’s No. 1 producer of goods and services, an economy with an annual rate of output of $3.12 trillion in the summer quarter. But my trusty spreadsheet tells me the state’s giant economy — home to roughly one-seventh of the national business output — had only a relatively meager jump in the July-to-September period when the national rebound shifted to high gear.
Statewide production, by GDP math, rose 7.9% in those three months. Yes, that’s a big number, but it trailed the nation’s 8.5% resurgence and only six states fared worse — Washington, D.C. (up 4.8%); Delaware (6.8%); Maryland (7.3%); Virginia (7.3%); New York (7.4%); and Hawaii (7.7%).
By the way, the summer’s best performers were Nevada with 12.2% growth, then Tennessee at 10.8% and Idaho at 10.6%.
It was quite a fall for California on the GDP scorecard as business lockdowns and restarts designed to limit the spread of coronavirus took a toll.
California was coming off a banner 2019 in which its 3.4% GDP growth was topped by just four states — New Mexico at 5.2%; Washington at 4.6%; Colorado at 3.9%; and Utah at 3.8%. Then came the virus in late winter 2020.
Early in the pandemic, the state’s economy did fairly well on a national scale. California business output fell 0.5% in the first quarter, better than the nation’s 0.9% decline drop and ranking 21st among the states.
Then came the horrible spring during which much of the nation shut down. California’s economy contracted 9.3% in the second quarter, but that was middle-of-the-pack pain by GDP calculations. The national decline was 9.5%, and California ranked 22nd from the top.
Yet, while much of the national economy reopened in the summer as the pandemic’s growth temporarily cooled, California took a more cautious path. GDP stats show the ongoing restrictions created a drag on key California industries.
California’s homebuying revival powered growth in real estate transactions 43% faster than the nation. Professional, scientific, and technical services — key white-collar industries that could skip virus restrictions with remote work — outpaced U.S. growth by 18%. And durable goods manufacturing — factories making items like electronics or transportation parts — ran 1% quicker than the nation.
Other California niches had sub-par results.
Medical needs are a hot-button issue, but statewide growth in spending on healthcare and social assistance statewide was 19% below the national rebound.
Yes, housing’s in high demand but building is still tricky in California. Construction growth was 17% below the national pace.
Logistics may be trendy but California transportation and warehousing grew 18% slower than U.S. norms. And wholesaling was 3% behind U.S. results.
Changing consumer priorities were a factor, too.
“Nondurable goods manufacturing” — items like clothing and food — grew 21% slower than the nation. Retail’s rebound was 7% cooler than elsewhere. Hospitality is hurting everywhere, but the statewide growth in spending on tourism and eateries was 2% below the national pace.
And statewide government spending expanded 29% less than the U.S. pace. This sluggishness is likely tied to concerns about tight municipal budgets due to lower tax collections in a slow economy.
Considering how hard the pandemic has hit the state at year’s end, it’s a good bet that California’s economic underperformance will continue.
Source: Orange County Register