[FoRK] Bit of California Dreamin', recovering from COVID

Rohit Khare rkhare at gmail.com
Mon Jun 14 15:23:19 PDT 2021

> California companies invested 16% of their revenues in R&D, or their
> future, when the rest of the U.S. put aside just 1%.

*California Defies Doom With No. 1 U.S. Economy*

The Golden State has no peers when it comes to expanding GDP, raising
household income, investing in innovation and a host of other key metrics.

By Matthew A. Winkler

June 14, 2021, 2:00 AM PDT

When misfortunes multiplied during the coronavirus pandemic, observers
seized on a four-letter word signaling end of days for the largest state
with one-eighth the U.S. population and 14% of its gross domestic
product. “California
doom: Staggering $54 billion deficit looms,”
<https://apnews.com/article/48a9ce5ad7494d22ec0c42ac46ae9baf> the
Associated Press concluded a year ago in May. “California Is Doomed,”
<https://www.businessinsider.com/california-is-doomed-2010-3> declared Business
Insider two months earlier. ”Is California doomed to keep burning?”
<https://newrepublic.com/article/159621/california-doomed-keep-burning> queried
the New Republic in October. California is “Doomed”
<https://www.yournec.org/sea-level-rise-is-california-doomed/> because of
rising sea levels, according to an April EcoNews Report. Bulletins of people
leaving the world's fifth-biggest economy
<https://kmph.com/news/local/people-are-leaving-california-at-record-rates> for
lower-cost states because of high taxes and too much regulation stifling
business continue unabated.

No one anticipated the latest data readout showing the Golden State has no
peers among developed economies for expanding GDP, creating jobs, raising
household income, manufacturing growth, investment in innovation, producing
clean energy and unprecedented wealth through its stocks and bonds. All of
which underlines Governor Gavin Newsom's announcement last month of the biggest
state tax rebate in American history

By adding 1.3 million people to its non-farm payrolls since April last year
-- equal to the entire workforce of Nevada -- California easily surpassed
also-rans Texas and New York. At the same time, California household income
increased $164 billion, almost as much as Texas, Florida and Pennsylvania
combined, according to data compiled by Bloomberg. No wonder California's
operating budget surplus, fueled by its surging economy and capital gains
taxes, swelled to a record $75 billion

If anything, Covid-19 accelerated California's record productivity.
Quarterly revenue per employee of  the publicly-traded companies based in
the state climbed to an all-time high of $1.5 million in May, 63% greater
than its similar milestone a decade ago, according to data compiled by
Bloomberg. The rest of the U.S. was nothing special, with productivity
among those members of the Russell 3000 Index, which is made up of both
large and small companies, little changed during the past 10 years.

While pundits have long insisted California policies are bad for business
<https://reason.org/commentary/george-will-details-problems-w/>, reality
belies them. In a sign of investor demand, the weight of California
companies in the benchmark S&P 500 Index increased 3 percentage points
since a year ago, the most among all states, according to data compiled by
Bloomberg. Faith in California credit was similarly superlative, with the
weight of corporate bonds sold by companies based in the state rising the
most among all states, to 12.5 percentage points from 11.7 percentage
points, according to the Bloomberg Barclays U.S. Corporate Bond Index.
Translation: Investors had the greatest confidence in California companies
during the pandemic.

The most trusted measure of economic strength says California is
the world-beater among democracies. The state’s gross domestic product
increased 21% during the past five years, dwarfing No. 2 New York (14%) and
No. 3 Texas (12%), according to data compiled by Bloomberg. The gains
added $530 billion to the Golden State, 30% more than the increase for New
York and Texas combined and equivalent to the entire economy of Sweden.
Among the five largest economies, California outperforms the U.S., Japan
and Germany with a growth rate exceeded only by China.

Enlarging its No. 1 footprint with factory jobs, California GDP from
manufacturing gained 13% over the past five years to $316 billion in 2020,
an increase unmatched by any of the 10 largest manufacturing states: Texas
was No. 2 with 9% growth, followed by Indiana at 8%, according to data
compiled by Bloomberg. For all its bluster as being “best for business,''
can't match California's innovation. California prosperity is rooted in its
appeal as a worldwide destination for technology and health-care
development. Of the 6,924 corporate locations in the state, 18% are
research and development facilities, a ratio that easily beats the U.S.
overall (11%), China (15%), U.K. (14%) and Japan (10%). Only Germany, at
19%, has a higher rate, according to data compiled by Bloomberg. The
percentage of Texas facilities for R&D is less than half California's at

Corporate California also is the undisputed leader in renewable energy,
with 26 companies worth $897 billion, or 36% of the U.S. industry, having
reported 10% or more of their revenues derived from clean technology. No
state comes close to matching the 21% of electricity derived from solar
energy. Shares of these firms appreciated 282% during the past 12 months
and 1,003%, 1,140% and 9,330% over two, five and 10 years, respectively,
with no comparable rivals anywhere in the world, according to BloombergNEF.
The same companies also increased their workforce 35% since 2019, almost
tripling the rate for the rest U.S. overall and four times the global rate.

Perennial water shortages and devastating fires drive the perception of
dystopia. But California reigns supreme with the  GDP-equivalent of $40.2
billion derived from agriculture, forest and hunting in 2020. That's
greater than the output from the next five largest states -- Iowa,
Washington, Illinois, Texas and Nebraska -- combined, according to data
compiled by Bloomberg.

Even with the economic disruptions caused by the pandemic, California
cemented its position as the No. 1 state for global trade, with its Los
Angeles and Long Beach ports seeing growth that led all U.S. rivals for the
first time in nine years in 2020. Much has been made of the state reporting
its first yearly loss in population, or 182,000 last year. Had it not been
for the Trump administration preventing new visas, depriving as many as
150,000 people
moving to California from other countries annually, the 2020 outcome would
have been more favorable.

Even so,  Republicans, opposed to Newsom's policies favoring immigration,
criminal justice reform and greater benefits for housing, health and child
care, want voters to decide whether he should be replaced in a potential
recall election later this year. Former San Diego Mayor Kevin Faulconer, a
Republican who is among those running to succeed him, said Newsom, a
Democrat, hurt the state's small businesses.

That's not what the data shows. The 373 California-based companies in the
Russell 2000 Index, which includes small-cap companies across the U.S.,
appreciated 39% the past two years and 85% since 2016, beating the
benchmark's 34% and 67%, respectively. The same California companies
reported revenue growth of 56% the past five years, dwarfing the
benchmark's 34%, according to data compiled by Bloomberg. More important,
California companies invested 16% of their revenues in R&D, or their
future, when the rest of the U.S. put aside just 1%.

Investing in the future is California's way, the opposite of doom.

— Matthew Winkler, Editor-in-Chief Emeritus of Bloomberg News, writes about

— With assistance by Shin Pei, and Tom Lagerman

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