State posts quarterly gain
California’s gross state product expanded 0.7%, City National Bank report shows.
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.”