June 14, 2018
California has vexed critics by continuing to be one of the fastest-growing economies in the U.S. Job growth has been among the fastest in the nation, and the state recently became the world’s 5th largest economy, surpassing the United Kingdom in terms of output, writes Beacon Economics’ Christopher Thornberg.
Yet, as Thornberg notes, those facts haven’t stopped negative or misleading predictions about the state of the state’s economy. That is dangerous he points out because these “false narratives” cause policymaker attention to focus on things that “don’t matter, while allowing them to ignore things that do.”
“No one doubts the strength of Silicon Valley,” says Thornberg. But the Bay Area’s fortunes don’t override the economic realities of the rest of the state.
Thornberg says the full picture is more than focusing only on high rental costs, high taxes and stifling regulations that are often blamed for driving mass outflows of business and higher-income families. He says, “the data reveal a picture in which economic prosperity is fairly wide spread.”
The Bay Area’s six-counties hold 20% of the population, though doesn’t account for the majority of the state’s personal income. The Bay Area has about 20% of the state’s employment, and captures 40% of high-income paying jobs, with 60% located across rest of the state. Today, the fastest growing regional economies in California from a jobs basis are Stockton, Fresno, and the Inland Empire, notes Thornberg.
On the housing front,Thornberg says, “Too often we hear that people are fleeing the state because of high housing costs. But housing costs are so high because the number of high-income earners across the state is growing faster than the supply of homes. Lack of supply is the critical issue. And this is important because the solutions to increasing supply are substantially different than those that deal strictly with affordability.”
Thornberg’s advice to policymakers and other public-sector leaders is to take into account and vet the narratives against real and credible data. He thinks that will allow for evidence-based decisions about where to invest time, money, and other resources.
For comments, questions or concerns, please contact Dennis Kaiser