Is California’s shrinking GDP a bubble or 12th best economy?
The “bubble watch” searches for trends that may indicate further economic and/or housing market problems.
Discussion: How slow was the start of 2022 for the economy? Well, California’s commercial output turned upside down, but it was still the 12th best performing among states on the GDP scorecard.
Source: My trusty spreadsheet analyzed the volatility of the first quarter, state-by-state, in GDP, a comprehensive measure of business output.
Trend
California’s economy produced goods and services at an annual rate of $3.57 trillion in the quarter, the No. 1 GDP production among the states, representing 14.6% of total US GDP.
Economic arch-rival Texas was at No. 2 at $2.15 trillion and Florida at No. 4 at $1.3 trillion. By the way, Vermont, the country’s smallest economy, was worth $38 billion, which was just a little over 1% of California’s output.
Yes, California commercial production decreased 1% in the first quarter. But this slippage looks relatively fair compared to the country’s 1.6% decline. Only 11 states fared financially by this measure.
The best GDP results came from New Hampshire, up 1.2%. The worst-case scenario was Wyoming, down 9.7%. Texas was ranked 35th, down 2.3%, while Florida was down 1.3% in 16th place.
amputation
Let’s look at what drove California’s growth economy in early 2022 — and what slowed it down. These economic markers are ranked based on their contribution to the overall 1% GDP decline of assets for the first three months of 2022.
Let’s start with what increased GDP…
information: All those technical data crunchers, webpage builders and computer coders — a long-running California force — fueled the state’s largest output. This niche added 0.46 percentage points to statewide production expansion.
Real estate leasing: Apartments and some commercial real estate bottoms are hot, as shown by the 0.35-point contribution to the growth of the rental industry.
government: Municipalities are flush with tax and stimulus dollars and don’t shy away from spending. This is a 0.21-point increase.
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professional services: The office type powering corporate California represented a 0.2-point blow to growth.
Utilities: Keeping the lights on is, really, good business – not to mention running water etc – and a 0.19-point boost.
Healthcare/Social Support: An expanding industry, of course, struggles with severe labor shortages. Nevertheless, it contributed 0.16 points to the growth.
administrative Services: All the other business stuff that needed to be completed—including the trash—added 0.14 points.
Construction: Rising costs, labor shortages, and shaky demand are cooling the space, with only a 0.1-point extra.
educational services: Private schools and colleges are flat on a full reopening of public schools. Just a 0.1-point addition.
management: Bosses are bosses but remote work can mean less of them. Boost to growth of only 0.06 points.
Arts, Entertainment and Entertainment: Last year’s fun-filled rush has stabilized, with only a retest of 0.05-point growth gains.
other services: Working largely individual, it’s barely moving as much as a 0.04-point increase.
Next, we look at the pressure on the economy…
Durable Goods Manufacture: Small slips for making bigger things – furniture, appliances, etc – equates to a 0.07 point deduction for development.
Excavation: Slow to get all kinds of things from gravel to oil out of the ground, taking 0.09 points off growth.
Transport/Storage: Logistics can only move at lightning speed for so long, so a slight chill translates into a 0.18-point drag on development.
Accommodation, Food: The labor shortage was a big headache, so this kind of fun is a 0.23-point pull.
wholesale trade: A lot of packed warehouses were hit by shrunken demands, so a 0.25-point cut was made for growth.
Finance and Insurance: Rising interest rates are initially bad for bankers. The rough transition took a 0.36 point cut from statewide growth.
agriculture: Here also there is a shortage of labour. Drag a 0.49-point on the extension.
retail business: The uneasiness of the consumers forced the traders to retreat. It was a freezing of 0.58 points on statewide production.
Non-durable goods manufacturing: Making things like food and clothing sank with the declining optimism of shoppers. This was a 0.77 point reduction in California’s production.
how bubbly?
On a scale from zero bubbles (no bubbles here) to five bubbles (five-alarm alert)… Three Bubbles!
These are odd times, so a slight chill in the business environment is good news.
The economy needs a mild slowdown to defuse inflationary pressures at four-decade highs. But can the Federal Reserve plan a micro-recession that doesn’t create a recession?
politically speaking
It’s a midterm election year, so here’s how to look at first quarter GDP through a nationally partisan lens…
The Blue States, which helped keep Joe Biden in the White House, had an output of $15.13 trillion – or 62% of the US economy. That annual rate of production was $209 billion, or a 1.4% drop in 12 months.
Red states, which did not support Biden, generated $9.25 trillion – or 38% of the US economy. That was a drop of $187 billion, or 2%.
Jonathan Lancer is a business columnist for the Southern California Newsgroup. He can be contacted at
