“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
Buzz: Just how slow was 2022’s start for the economy? Well, California’s business output went into reverse, but it still had the 12th-best performance among the states on the gross domestic product scorecard.
Source: My trusty spreadsheet analyzed the first quarter’s ups and downs, state by state, in GDP, a broad measure of business output.
The trend
California’s economy produced goods and services at a $3.57 trillion annual rate in the quarter, the No. 1 GDP output among the states, representing 14.6% of the overall U.S. gross domestic product.
Economic arch-rival Texas ranked No. 2 at $2.15 trillion and Florida was No. 4 at $1.3 trillion. By the way, the nation’s smallest economy was Vermont at $38 billion, which was just slightly more than 1% of California’s output.
Yes, California’s business output did shrink by 1% in the first quarter. But that slippage looks relatively OK when compared with the nation’s 1.6% drop. Only 11 states fared better economically, by this measurement.
The best GDP results came from New Hampshire, up 1.2%. Worst was Wyoming, down 9.7%. Texas ranked No. 35, down 2.3%, while Florida was No. 16, down 1.3%.
The dissection
Let’s see what drove California’s growth economy — and what slowed it down — at the start of 2022. These economic niches are ranked by their contribution to the estate’s overall 1% GDP decline for 2022’s first three months.
Let’s start with what boosted GDP …
Information: All those techy data crunchers, webpage constructors and computer coders — a long-running California strength — produced the state’s largest output boost. This niche added 0.46 percentage points to the statewide output expansion.
Real estate leasing: Apartments and certain commercial real estate niches are hot, as shown by the rental industry’s 0.35-point contribution to growth.
Government: Municipalities are flush with tax and stimulus dollars and not shy about spending. It’s a 0.21-point growth addition.
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Professional services: The office types that power Corporate California represented an 0.2-point jolt for growth.
Utilities: Keeping the lights on, literally, is good business — not to mention keeping water flowing, etc. — and a 0.19-point boost.
Healthcare/social assistance: An expanding industry, for sure, with serious worker shortage struggles. Still, it contributed 0.16 points to growth.
Administrative services: All that other business stuff that needs to get done — including the garbage — added 0.14 points.
Construction: Soaring costs, labor shortages, and shaky demand are cooling this niche, just an 0.1-point addition.
Educational services: Private schools and colleges are flat as public schools fully reopened. Just a 0.1-point addition.
Management: Bosses are bosses but remote work could mean less of them. Only a 0.06-point growth boost.
Arts, entertainment, and recreation: Last year’s rush to have fun has plateaued with recreating only a 0.05-point growth enhancement.
Other services: Largely doing personal chores, it’s barely advancing as 0.04-point growth addition.
Next, we look at the drags on the economy …
Durable goods manufacturing: Small slip for making big things — furniture, appliances, etc. — equals an 0.07-point cut to growth.
Mining: Getting all sorts of things out of the ground — from gravel to oil — slowed, cutting 0.09 points off growth.
Transportation/warehousing: Logistics could only grow at lightning speed for so long, so a minor chill translates to an 0.18-point drag on growth.
Accommodations, food: Workers shortages were a big headache, so this kind of fun is an 0.23-point drag.
Wholesale trade: Too many packed warehouses collided with shrunken demands, so an 0.25-point cut to growth.
Finance and insurance: Soaring interest rates are initially bad for bankers. A rough transition cut 0.36 points from statewide growth.
Agriculture: Workers shortages hurt here, too. An 0.49-point drag on expansion.
Retail trade: Consumers’ anxiousness forced merchants to pull back. This was an 0.58-point chill on statewide output.
Nondurable goods manufacturing: Making stuff such as food and clothing sunk with shoppers’ declining optimism. It was an 0.77-point reduction in California output.
How bubbly?
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … THREE BUBBLES!
These are odd times so a slight chill in the business climate is sort of good news.
The economy needs a mild slowdown to cool inflationary pressure running at a four-decade high. But can the Federal Reserve orchestrate a subtle slowdown that doesn’t create a recession?
Politically speaking
It’s a mid-term election year, so here’s how first-quarter GDP looked through a national partisan lens …
Blue states, those that helped put Joe Biden in the White House, had $15.13 trillion of output — or 62% of the U.S. economy. That annual rate of production was down $209 billion over 12 months, or a 1.4% dip.
Red states, those who didn’t support Biden, produced $9.25 trillion — or 38% of the U.S. economy. That was down $187 billion, or a 2% tumble.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
Source: Orange County Register
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