State posts quar­terly gain

Cal­i­for­nia’s gross state prod­uct ex­panded 0.7%, City Na­tional Bank re­port shows.

Los Angeles Times - - BUSINESS BEAT - By Chris Kirkham chris.kirkham@latimes.com

Cal­i­for­nia’s im­prov­ing econ­omy ex­panded in the f irst three months of this year, ac­cord­ing to new es­ti­mates re­leased Wed­nes­day, de­spite an over­all con­trac­tion in U. S. out­put over the same pe­riod.

Although bad weather and slow­downs in the energy sec­tor caused the U. S. econ­omy to shrink 0.2% in the f irst quar­ter, Cal­i­for­nia’s gross state prod­uct ex­panded 0.7%, ac­cord­ing to City Na­tional’s quar­terly econ­omy and jobs re­port from City Na­tional Bank.

Growth was still slower than the last three months of 2014, when the state’s econ­omy ex­panded 2.2%, but over the last year Cal­i­for­nia’s econ­omy has grown at the fastest rate in nearly a decade.

“That’s a pretty im­pres­sive data point,” said Bruce Si­mon, chief in­vest­ment of­fi­cer of City Na­tional Rochdale, a di­vi­sion of the bank. “The Cal­i­for­nia econ­omy still man­aged to grow sig­nif­i­cantly faster than the rest of the U. S. econ­omy.”

The big­gest con­trib­u­tors to Cal­i­for­nia’s eco­nomic growth for the f irst quar­ter were the in­for­ma­tion sec­tor — in­clud­ing soft­ware and en­ter­tain­ment — and whole­sale trade, ac­cord­ing to the anal­y­sis from Bea­con Eco­nom­ics of Los An­ge­les. The big­gest slow­down in eco­nomic growth for the state was in the man­u­fac­tur­ing sec­tor.

Christo­pher Thorn­berg, found­ing part­ner of Bea­con Eco­nom­ics, said slow­ing growth in China has put pres­sure on man­u­fac­tur­ing ex­ports from the United States.

Although Cal­i­for­nia makes up about 12% of the U. S. work­force, the state has been re­spon­si­ble for more than 16% of all new jobs cre­ated since the la­bor mar­ket bot­tomed out in 2010.

That puts the state fourth in job growth over that pe­riod, be­hind North Dakota, Utah and Texas.

De­spite the slower growth rate, the re­port projects that Cal­i­for­nia’s eco­nomic out­put and job growth will be faster in 2015 than last year and will out­pace the over­all U. S. econ­omy.

Thorn­berg ex­pects the hous­ing mar­ket to con­trib­ute more to eco­nomic growth this year, with home sales trend­ing up­ward.

The in­crease in prices will bring new wealth and spend­ing to the econ­omy in the short run, Thorn­berg said. But the over­all short­age in the state’s hous­ing sup­ply will pose a chal­lenge as the un­em­ploy­ment rate con­tin­ues to go down in the com­ing years.

“That prob­a­bly is the big­gest medium- term chal­lenge to the state’s growth — the in­abil­ity to have the hous­ing we need to sup­port growth,” he said. “Ul­ti­mately, growth has to be ac­com­mo­dated by ex­pand­ing the hous­ing sup­ply.”

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