California’s Economy Outpaces Expectations

March 27, 2015 |   | Contact: M. Daniel DeCillis

Tech industry employment 2014
California led the nation in 2014 in tech industry employment, with over 1.1 million employees; the state added nearly 33,000 jobs in this sector during the year. Source: CyberStates 2015.

California’s economic woes of the past decade are well-known by now. The cost of doing business in the state remains high, according to Forbes, and the state’s business tax climate has been criticized by organizations such as the Tax Foundation. It was a surprise to some, as a result, when Bloomberg recently called California the “best state for business right now.”

Since 2011, the 63 publicly traded California companies in the Standard & Poor’s 500 produced the best total return among the five states with the largest populations, delivering returns of 134 percent. Companies located in California have also outperformed the S&P 500 during the past four years.

“California-based companies surpass their competitors in the U.S. by most measures of performance favored by investors,” said the Governor’s Office of Business and Economic Development (“GO-Biz”) in a recent news brief.

The positive assessment is good news for California, which continues to rebuild following the recession that afflicted the state between 2004 and 2010. Technology companies have been a central component of California’s success story. Bloomberg noted that California’s technology companies was $715 billion, or 52 percent of technology company sales in the U.S. Key drivers among these companies include specialty pharmaceuticals, energy, and biotechnology.

However, there are still indications that California needs to work to sustain and grow its high-tech business community. While biotechnology companies in California outperformed the S&P 500 by 333 percent over the past 4 years, the Boston-Cambridge area was actually recently named as the top biotech cluster in the U.S. by Genetic Engineering & Biotechnology News, ahead of the San Francisco Bay Area, based on the clusters’ NIH funding, venture capital financing, number of patents and jobs, and total lab space. And California’s job growth for the manufacturing sector, according to the California Manufacturers & Technology Association, has not kept pace with that of the nation between 2010 and 2014.

But California remains the number one state for manufacturing, according to Bloomberg, with high technology jobs in California’s business and professional services sector forecast to grow to 15.7 percent of the economy in 2014 (up from 15.4 percent in 2013). And despite these concerns, the future looks brighter for California than it has in a long time.

“The state’s job growth outpaced the nation in the first nine months of 2014,” said the GO-Biz statement. “(And) the percentage of people saying California is on the right track is three times what it was in 2010.”

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