California’s Economic Outlook According to Governor Newsom’s Proposed 2020-21 Budget
California’s job creation and economic growth have exceeded the nation since the Great Recession. At this point consumer spending is the major contributor to our nation’s economic growth (GDP). Neither business investment nor exports nor government spending are significantly contributing our current growth. GDP growth is expected to continue at about 2%, then slow to 1.5%.
California’s real per capita income after adjusting for inflation has grown from about $55,000 per capita in 2007 to $63,500 in 2016; however the median has barely changed in the last ten years. We have added 2.1 million new jobs. Our state’s job growth has been in professional and business services (470,000), education and health (831,000), leisure and hospitality (461,000). We have added 82,000 highly paid information sector jobs and we have lost 110,000 manufacturing jobs.
Personal income is projected to grow by 4% a year for the several years, and housing permits will continue to increase.
The risks of a recession are increasing due to the President’s tariffs and trade war, the potential for stock market corrections, the potential for a global economic slowdown and our aging population. But the Department of Finance and the LAO are not predicting a recession, due in large part to the Federal Reserve’s three rate cuts over the past year.
The biggest risks to the California economy are its high priced housing impairing job creation, insufficient housing production and the aging of its population.
Prepared by: Lucien Wulsin
Dated: 1/19/20