California Economic Overview Kevin Klowden Director of the California Center, & Managing Economist for the Milken Institute (310) 570 4626 kklowden@milkeninstitute.org www.milkeninstitute.org LAEDC Economic Forecast Wednesday, February 15, 2012 Los Angeles Downtown Marriot Los Angeles,CA
Job growth in California surpasses U.S. Non-farm employment Percent 4.0 20 2.0 0.0 United States -2.0-4.0-6.0 California -8.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Moody s Analytics
Real GDP growth projection Percent change over previous year, 2000-2015 Percent 16 14 12 10 8 6 India China Forecast California 4 2 0-2 -4 United States -6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Oxford Economics, Moody s Analytics, California Legislative Analyst Office, Milken Institute.
Best-performing California cities 2011 vs. 2010 Best-performing California cities Rank according to 2011 index, Among Largest 200 metros 2011 2010 2011 2010 Metropolitan statistical area (MSA) rank rank Metropolitan statistical area (MSA) rank rank Bakersfield, CA 47 27 Sacramento Arden Arcade Roseville, CA 144 142 San Jose Sunnyvale Santa Clara, CA 51 132 Fresno, CA 146 124 San Francisco San Mateo Redwood City, CA 52 103 Visalia Porterville, CA 151 70 Merced, CA 63 168 Santa Cruz Watsonville, CA 161 185 San Diego Carlsbad San Marcos, CA 69 76 Riverside San id Bernardino Ontario, i CA 162 146 Santa Barbara Santa Maria Goleta, CA 99 138 Santa Ana Anaheim Irvine, CA 165 172 Vallejo Fairfield, CA 102 115 Santa Rosa Petaluma, CA 167 188 San Luis Obispo Paso Robles, CA 103 114 Oakland Fremont Hayward, CA 168 178 Oxnard Thousand Oaks Ventura, CA 124 180 Modesto, CA 174 193 Los Angeles Long Beach Glendale, CA 135 158 Stockton, CA 187 186 Salinas, CA 142 128 Source: Milken Institute. Source: Milken Institute.
Unemployment rate California vs. United States Percent 14 12 10 California 8 6 United States 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Moody s Analytics.
Unemployment rate California s Metros vs. United States Percent 14 12 10 8 6 Silicon Valley Los Angeles United States 4 2 San Diego 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Moody s Analytics.
Higher share unemployed for longer duration Unemployment by duration, California Percent 50 40 30 20 10 Less than 5 wks 5-14 wks 15-26 wks 27 wks and over Source: California Employment Development Department.
General fund revenues and expenditures California, FY 1980-81 to FY 2011-12, change from previous year Percent 30 25 20 15 10 5 0-5 -10 Revenue and transfer Expenditure -15 1980 1984 1988 1992 1996 2000 2004 2008 Source: California Department of Finance.
Foreclosure rates As percent of all loans, California vs. U.S., as of Q3 2011 Percent 2.5 2.0 California 1.5 1.0 0.5 United States 00 0.0 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Moody s Analytics.
Home sales Change on previous year, California vs. U.S., as of Q3 2011 Percent 100 80 60 40 20 0-20 California United States -40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Moody s Analytics.
Professional/business services led the recovery Year-over-year job growth by industry, California 12/2010-12/2011 12/2011 Thousand of jobs Professional/Business Svcs. Government 56.5 63.4 Education/Health Svcs. Trade/Transportation/Utilities Hospitalities Information Svcs. 27 23.3 36.2 42.6 Construction 21.3 Minning Other Svcs. Financial Svcs. Manufacturing -1.1-2.3-4.4 0.7-10 0 10 20 30 40 50 60 70 Sources: U.S. Department of Labor, Wells Fargo Securities LLC.
Economy shifts towards services Professional and business services vs. manufacturing, California Jobs, Thousands 2400 2200 Prof. & business services 57 2000 53 1800 1600 1400 44 Manufacturing 1200 1000 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Sources: Bureau of Labor Statistics, Moody s Analytics.
California leads the way in clean technology Top venture capital states by number of companies, 2006 - June 2010 Overall clean-tech innovation Number of Rank State companies 1 California 227 2 Massachusetts 61 3 Texas 38 4 Washington 25 5 New York 21 Renewable electricity Number of Rank State companies 1 California 87 2 Massachusetts 22 3 New York 11 4 Texas 9 5 Washington 8 California received 39% share of VC investments among North American companies ($654 million out of $1.69 billion) in Q2 2011. Source. Cleantech Group LLC.
Top ten academic tech transfer offices By number of patents issued in 2008 Number of patents 250 200 150 100 50 0 Sources: AUTM U.S. Licensing Survey: FY2008.
California s cutting-edge industries Solar power Green vehicles Leader in fuel economy standards and registered hybrids, electric and natural gas-fueled cars. Los Angeles and San Francisco are the top U.S. hybrid markets. 38% of the nation s solar energy patent registrations. Fast-growing local demand for clean tech. Roof-top solar installations have doubled two years in a row. Life sciences clusters San Diego, Los Angeles and San Francisco are among top clusters. Strong player in genomic medicine and photosynthetic algae technology As of 10/2011. Leader in venture capital investments 58% of all recent venture capital funds are in California 9 of the 11 biggest investments are in the state Major player in clean-energy investments. Next generation of high-tech industries First in semi-conductor research Pouring resources into green ventures Example: digitized energy grid Ultra-high-def video conferencing Sources: Time, PricewaterhouseCoopers, National Venture Capital Association, Thomson Reuters, Tesla, Milken Institute.
California sees exodus of companies Founded in California, now with more employees in Oregon New major expansion in North Carolina
Wage costs 5th highest in the nation Most expensive states, 2010 Rank State Index 1 New York 124.3 2 Connecticut 124.1 3 Massachusetts 120.6 4 New Jersey 118.7 5 California 115.1 6 Maryland 113.0 7 Virginia 108.1 8 Illinois 107.2 9 Alaska 105.7 10 Washington 104.9 Sources: BEA, Moody's Analytics, Milken Institute.
Tax climate among least favorable Major components of the state business tax climate index, 2010 Selected States Corporate Tax Index Rank Unemployment Insurance Tax Index Rank Property Tax Index Rank Total Rank Highest tax burdens New Jersey 41 25 50 50 New York 20 47 43 49 California 34 14 13 48 Lowest tax burdens South Dakota 1 35 11 1 Wyoming 1 27 35 2 Alaska 26 29 15 3 Source: Tax Foundation.
Kauffman Index for Entrepreneurial Activities Rank Metropolitan Statistical Area (15 largest metros, 2010) Entrepreneurs per 100,000 people 1 Los Angeles-Long Beach-Santa Ana, CA 620 2 Houston-Baytown-Sugar Land, TX 580 2 Atlanta-Sandy Springs-Marietta, GA 580 4 San Francisco-Oakland-Fremont, CA 550 5 Miami-Fort Lauderdale-Miami Beach, FL 540 6 New York-Northern New Jersey-Long Island, NY-NJ-PA 360 6 Washington-Arlington-Alexandria, DC-VA-MD-WV 360 6 Phoenix-Mesa-Scottsdale, AZ 360 9 Boston-Cambridge-Quincy, MA-NH 330 10 Riverside-San Bernardino, CA 320 11 Chicago-Naperville-Joliet, IN-WI 290 12 Detroit-Warren-Livonia, MI 280 13 Dallas-Fort Worth-Arlington, TX 260 14 Seattle-Tacoma-Bellevue, WA 220 15 Philadelphia-Camden-Wilmington, PA-NJ-DE 150 Sources: Source Kauffman Foundation.
California among least friendly toward small business Small business survival index, California rankings, 2010 Rank among states Index components (1 = Best, 51 = Worst) Personal income tax rate 49 Capital gains tax rate 50 Corporate income tax rate 42 Corporate capital gains tax rate 43 Property taxes 31 Sales tax 22 Unemployment tax 1 Health insurance mandates 42 Electric utilities 42 Workers' compensation 43 Crime rate 23 Number of government employees 7 Gas tax 51 State and local gov. 4-year spending trends 29 State and local gov. expenditures 47 Highway cost effectiveness 48 Overall Small-Business Survival Index 48 Source: Small Business and Entrepreneurship Council. Note: Includes District of Columbia
California s innovation and R&D assets are among its competitive advantages Milken Institute State Technology and Science index, Top ranked states, 2010 California ranked 4th Source: Milken Institute. Top 10 Second tier Third tier Bottom 10
Venture capital investments by state 2010 VC investments, total US$ millions 12,000 10,000 8,000 6000 6,000 4,000 2,000 VC investments (Left) VC deals (Right) Number of deals 1,400 1,200 1,000 800 600 400 200 0 CA MA NY TX WA IL PA CO NC NJ 0 Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report. Data: Thomson Reuters.
Port activity continues to support recovery California, annual growth Percent 40 30 20 10 0-10 -20-30 -40 Exports Imports -50 2008 2009 2010 2011 Sources: California Department of Finance
Ports contribution to economy Value of goods traded through ports in 2010 US$ billions 450 400 350 300 250 200 150 100 50 0 $397b 22% of Real GDP of California California including all ports $120b 18% of Real GDP of Los Angeles Los Angeles metro including Port of LA and Port of Long Beach Sources: California Department of Finance, American Association of Port Authorities.
California exports composition Q3, 2011 South Korea 5% Percent of total CA export value, 4-Q average Europe 19% Other 32% China 9% Japan 8% Canada 11% Mexico 16% Sources: U.S. Department of Commerce, Wells Fargo Securities LLC.
Asia represents a large share of California s export California vs. U.S., 2010 Percent 40 34.9% 30 21.3% 20 10 0 Sources: U.S. Census, Milken Institute. California U.S.
Middle-skills gap indicates skills mismatch California, 2009 Source: National Skills Coalition.
Home-grown high-tech talent on the decline Recent S&E graduates per 1,000 civilian workers, California Interstate ranking 1 6 11 16 21 26 31 36 41 46 51 Bachelor's degree Master's degree Ph.D. 2001 2005 2007 Sources: National Science Foundation, Milken Institute.
Mediocre academic performance for the average high school graduate Mean SAT score, top ten states and California, 2010 Score 1800 1750 1700 1650 1600 California ranked 35th. 1550 1500 IA MN WI MO MI SD IL KS NE ND CA Note: Red line denotes the national average. Source: College Board.
Nearly half of Spanish speakers in California did not finish high school Educational attainment by language spoken at home, 2010 Percent 120 100 Less than high school High school Some college or associate's B.A. or higher 80 60 40 20 0 English Spanish Other Sources: U.S. Census Bureau, Milken Institute.
Going to college is costly For undergrad at public university, as share of disposable income Percent 60 Highest 50 40 30 20 10 0 40.2% 2008 Change from 10 years ago Lowest -10 SC VT OH MI PA CA SD FL AK LA WY Source: National Science Foundation.
Heavy reliance on foreign-born tech talent STEM degree holders in California, 2009 Thousands 350 300 Native Foreign-born 250 200 150 100 50 0 Engineering Physical sci. Bio and life sci. Math and stat Computer/info Sources: U.S. Census Bureau, Milken Institute.
California is the main host of foreign students Number of foreign students, top ten states, AY 2009/10 Per 1,000 people 35 California ranked 1st. 30 25 20 15 10 5 0 CA NY FL IL PA TX OH MI MA IN Source: Institute of International Education.
Geographical distribution of H-1B employees Newly certified, 2001 vs. 2010 FY 2001 FY 2010 Other states 36.3% Massachusetts 5.3% Florida 5.3% California 22.1% Other states 41.6% New York 12.0% Texas 7.8% New Jersey Massachusetts Illinois Florida Illinois 6.7% 4.1% 4.5% 4.2% 5.2% California 18.2% New York 11.7% Texas 8.3% New Jersey 6.7% Sources: Foreign Labor Certification Data Center, Milken Institute.
Top 10 industries of H-1B employees Newly certified in 2010, California Industry Total Percent Computer systems design and related services 18,264 36.3 Semiconductor and other electronic component manufacturing 2,360 4.7 Colleges, universities, and professional schools 2,248 4.5 Management, scientific, and technical consulting services 1,655 3.3 Scientific research and development services 1,650 3.3 Computer and peripheral equipment manufacturing 1,614 32 3.2 Architectural, engineering, and related services 1,494 3.0 Software publishers 1,414 2.8 Communications equipment manufacturing 1,394 2.8 Accounting, tax preparation, bookkeeping, and payroll services 839 1.7 Other 17,407 34.6 Sources: Foreign Labor Certification Data Center, Milken Institute.
Attracting vs. retaining talent: Net migration masks the full story Interstate ranking, migration rates of B.A. degree holders, 2009 Inflow rate Outflow rate Net inflow rate (ranked from highest to (ranked from lowest to (ranked from highest to Statet lowest) highest) h lowest) Delaware 1 35 1 Oregon 11 14 2 Arkansas 14 17 3 Colorado 15 26 4 Iowa 26 5 5 Texas 39 2 6 Louisiana 25 12 7 Virginia 7 36 8 Kentucky 17 28 9 South Carolina 13 31 10 California 48 1 18 Sources: U.S. Census Bureau, Milken Institute.