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CALIFORNIA & AD53's ECONOMY, TRADE & THE GLOBAL ECONOMY

 

A CURRENT MARKET OVERVIEW, ANALYSIS

 AND 2009 SNAPSHOT

 

Related Story:

 US & California Economic Restructuring (3/07/09)

California's Primary Economic regions & World Trade

California is home to several significant economic regions with trade with virtually every country around the world. The economy of California is a dominant force in the economy of the United States, with California paying more to the federal system than it receives in direct monetary benefits.

 

 

Trade industries of central importances include:

 

 

 Sectors

In 2002, the U.S. government adopted an updated system of classifying economic activities (called the North America Industry Classification System, or NAICS), to better reflect today's economy.

 

In terms of jobs, the largest sectors in California's economy as of 2006 are:

  • Trade, Transportation and Utilities: Wholesale and Retail, Import-Export businesses, Warehousing, etc.
  • Government
  • Professional and Business Services: Management of Companies and Enterprises; Legal, Scientific and Technical Services; Administrative and Support Services
  • Education, Health and Other services
  • Leisure and Hospitality: Tourism, Arts, Entertainment, Recreation, Food Services
  • Manufacturing: Computers and Electronics, Aerospace, Apparel, Oil, other
  • Financial Services: Finance, Insurance, Real Estate
  • Construction
  • Information: Motion Picture Production, Broadcasting, Publishing, Internet businesses and Telecommunications
The Hollywood sign is the most well-known symbol of California's huge entertainment industry.
  • Agriculture and Mining

In terms of output, the largest sectors are:

  • Financial Services
  • Trade, Transportation and Utilities
  • Education, Health and Other services
  • Government
  • Manufacturing
  • Professional and Business Services
  • Information
  • Leisure and Hospitality
  • Construction
  • Agriculture and Mining

 

 

CALIFORNIA BUDGET CRISIS : 2008-09

 

The 2008–2009 budget crisis in California is an ongoing fiscal crisis in which the state faces a budget shortfall of at least $11.2 billion,[1] projected to top $40 billion over the 2009–2010 fiscal years.[2] The budget crisis is a result of the larger subprime mortgage crisis and the economic crisis of 2008. On September 23, 2008, about 3 months after its due date, Governor Arnold Schwarzenegger signed the 2008-2009 budget.[3][4] Worsening financial conditions that followed left the state with a large shortfall. A two-thirds vote is required to pass a budget, and in both the original budget negotiations and in the attempt to revise the budget no political party by itself had enough votes to pass a budget. The majority Democrats fought to minimize cuts to programs, while most of the minority Republicans refused to accept any tax increase. The original budget was put together by Democrats and some Republicans using spending cuts, internal borrowing, and accounting maneuvers.[3][4] On April 1, 2009 the state sales and use tax was temporarily increased by 1%.[5] Other state response to the crisis has included mandatory state employee furloughs and the delay of state tax refund payments.

 

International trade and tourism

California has historically derived significant revenue from international trade and tourism. . However, the state's share of America's merchandise export trade has been steadily shrinking since 2000, from 15.4% to 11.1% in 2008. The exports of goods made in California totaled $134 billion in 2007. $48 billion of that total was computers and electronics, followed by transportation, non-electrical machinery, agriculture, and chemicals. California trade and exports translate into high-paying jobs for over one million Californians. According to the U.S. Department of Commerce, Bureau of Economic Analysis, in 2005, foreign-controlled companies employed 542,600 California workers, the most of any state. Major sources of foreign investment in California in 2005 were Japan, the United Kingdom, Switzerland, France, and Germany. Foreign investment in California was responsible for 4.2 percent of the state's total private-industry employment in 2005.  ]Total direct travel spending in California reached $96.7 billion in 2007, a 3.6% increase over the preceding year.  Los Angeles County receives the most tourism in the state.

Agriculture

Agriculture (including fruit, vegetables, dairy, and wine production) is a major California industry. In fact, California is the world's fifth largest supplier of food and agriculture commodities. Agriculture accounts for just slightly over 2% of California's $1.55 trillion gross state product.[citation needed] Airborne exports of perishable fruits and vegetables amounted to approximately $685 million in 2007.By way of comparison, California exported more agricultural products by air that year than 23 other states did by all modes of transport.

 

According to the California Department of Food and Agriculture, "California agriculture is nearly a $36.6 billion dollar industry that generates $100 billion in related economic activity." The state’s agricultural sales first exceeded $30 billion 2004[12], making it more than twice the size of any other state's agriculture industry.

California is the leading dairy state. Milk is California's number one farm commodity. California's dairy industry generated $47 billion "in economic activity" in 2004 and employed over 400,000 people."

 

 

CALIFORNIA - JOBS, EMPLOYMENT, INCOME & HOUSING #S (2008-09)

 State employee furloughs

 

 

On December 19, 2008, Gov. Schwarzenegger ordered mandatory furloughs for state employees.[6] As part of the furlough, various state offices are closed on the 1st and 3rd Fridays of every month from February 1, 2009 through June 30, 2010, and are estimated to save the State $1.3 billion dollars.[7] On Jan. 29, 2009, a Superior Court Judge ruled that Gov. Arnold Schwarzenegger has emergency furlough power, and on February the 3rd District Court of Appeal in Sacramento said the appeal to the decision came too late and was incomplete, so judges were unable to determine if a halt to state furloughs is legally justified.[7]   In addition to the furloughs, the governor initiated other layoffs, reductions and efficiencies to achieve savings of up to 10 percent.[8] In November 2008, Schwarzenegger proposed to the California legislature spending reductions. For example, the Columbus Day holiday for state employees would be eliminated. The state would no longer pay time-and-a-half to employees working on holidays. Departments would allow employees to work a ten-hour work day, four days a week, and California would no longer pay overtime for leave time worked.[9]



Per capita personal income

Per capita personal income was $38,956 as of 2006, ranking 11th in the nation. Per capita income varies widely by geographic region and profession. The Central Valley has the most extreme contrasts of income, with migrant farm workers making less than minimum wage. While some coastal cities include some of the wealthiest per-capita areas in the U.S., notably La Jolla near San Diego, Beverly Hills, in Los Angeles County, Newport Beach in Orange County in Southern California, San Francisco and Marin County. The most expensive and largest housing markets in the U.S. are in the state of California, so there are a number of communities where average housing prices hover between US$1–2 million. Generally, the Central Valley in northern California is the least expensive area, as is the Inland Empire in Southern California, though prices in the Inland Empire, though falling, are still much higher than the Central Valley, to the point that there are also communities in this area where housing prices average around the $1 million mark. The agricultural central counties have some of the highest poverty rates in the U.S. The high-technology sectors in Northern California, specifically Silicon Valley, in Santa Clara and San Mateo counties, are currently emerging from the economic downturn caused by the dot-com bust, which caused the loss of over 250,000 jobs in Northern California alone. Recent (Spring 2005) economic data indicates that economic growth has resumed in California, although still slightly below the national annualized forecast of 3.9%. The international boom in housing prices has been most pronounced in California, with the median property price in the state rising to about the half-million dollar mark in April 2005.

 

Tax burden

Starting in April 2009 there will be a new tax increase that is set to increase sales tax from 8.25% to 9%+.  In 2006 California's overall tax burden of $10.66 per $100 of personal income was slightly above the $10.43 average for the United States. In 2008, when measured as a percentage of GDP, California had the 6th highest tax burden of the fifty states.

 

 

Housing

The international boom in housing prices has been most pronounced in California, with the median property price in the state rising to about the half-million dollar mark in April 2005. Orange County, Ventura County and the San Francisco Bay Area have the highest median prices, each approaching $650,000. The least expensive region is the Central Valley, with a median price of $290,000. Various real estate markets in California experienced sharp increases in value in the early 2000s, followed by declines in 2007 and 2008, as a housing bubble burst. However, beginning in 2007 with the Credit Crunch in the banking system, thousands of homes have been foreclosed statewide, thereby plummeting home prices.
SPECIAL NOTE RE TRUE U.S. & CALIFORNIA UNEMPLOYMENT(from Monthly Review's Editor & Economist, John Bellamy Foster):


"...It is now universally recognized that the U.S. economy is experiencing a deep downturn unlike anything seen since the 1930s. Hence, the question continually arises: How close is this to a depression? One way of answering is to look at the unemployment rate. The Great Depression hit bottom in 1933 when unemployment peaked at 25 percent. Today the United States is losing jobs at the rate of 600,000 a month. But the official unemployment rate currently stands at 8.1 percent (seasonally adjusted, February 2009). This is the highest rate of official unemployment in a quarter-century, but hardly what is considered a depression-level rate, which is usually thought of as well into the double-digits.

 

However, it is increasingly apparent that the official unemployment rate is much too conservative in its measure of labor underutilization, causing some of the better economic analysts to place their emphasis on the most inclusive unemployment rate provided by the Bureau of Labor Statistics (BLS), known as the U-6 measure, as opposed to U-3 (the official unemployment rate). U-6 is comprised of three components: (1) The “officially unemployed,” or U-3, those who are jobless and have looked for work in the past four weeks. Plus (2) “marginally attached workers,” or jobless individuals who desire employment and have looked in the past year but are not presently looking. (This includes as subcategories: [a] “discouraged workers” who consider the job market effectively closed to them; and [b] all other marginally attached workers, who often point to structural reasons for not pursuing employment, such as lack of childcare or transportation.) Plus (3) those “part time workers” who are part time for economic reasons and desire full-time employment. (John E. Bregger and Steven Haugen, “BLS Introduces a New Range of Alternative Unemployment Measures,” Monthly Labor Review 118, no. 10 [1995].) The U-6 unemployment rate is currently at 16 percent (non-seasonally adjusted, February 2009) with that rate for men being 18%. 

 

...The important fact is that although fluctuations in the unemployment and jobless rates for men followed each other closely until the 1980s, after that the unemployment rate fell while the jobless rate increased, widening the gap between the two. At present there is a 10 point gap between the two rates (with the unemployment rate for men in February 2009 at 8 percent and the jobless rate for men at 18 percent). This compares to about a 3 point separation between the unemployment and jobless rates for men in the mid-1970s. In fact, today’s jobless rate for men is currently 12 percentage points higher than it was in 1948 when it was only 6 percent. The jobless rate for all workers (women as well as men) at present (February 2009) is 23 percent. ...

 

...Employers and government statisticians are mainly interested in how much slack there is in the economy and not in the level of human misery. Yet, a close examination reveals the depth of human misery as reflected in unemployment statistics is nonetheless profound. One out of every six workers is currently unemployed or underemployed according to the U-6 accounting. While close to one out of every four prime-age adults are jobless according to jobless rate calculations. Providing useful and (to the extent possible) rewarding employment for all is something that should be demanded of any economy. If the existing system cannot provide this, then reason and morality suggest that the underlying population should rise up and replace it with one that can.

 

          — (Monthly Review, March 6, 2009)

 References

  1. ^ "California 'faces budget crisis'". BBC News. 2008-12-02. http://news.bbc.co.uk/2/hi/americas/7760249.stm. Retrieved on 2009-02-08. 
  2. ^ "California delaying tax refunds amid cash crisis". Reuters. 2009-01-16. http://www.reuters.com/article/domesticNews/idUSTRE50F6JH20090116. Retrieved on 2009-02-08. 
  3. ^ a b http://www.sacbee.com/111/story/1259330.html, retrieved 2-16-09
  4. ^ a b http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_88&sess=PREV&house=B
  5. ^ Sales and Use Tax Rate Increases on April 1, 2009
  6. ^ http://www.gov.ca.gov/executive-order/11310/, retrieved 2-5-09
  7. ^ a b Appeals court denies union request to halt furloughs, The Sacramento Bee, Friday, Feb. 06, 2009
  8. ^ http://www.dpa.ca.gov/news/news/2008/20081219-01.htm
  9. ^ http://www.dpa.ca.gov/news/news/2008/20081106-01.htm