News / USA

California Economy Sees Improvement, Continuing Trouble

Sundar Pichai, VP of Product Management for Google, displays a Samsung notebook running on the Chrome operating system at the Google IO Developers Conference in San Francisco, May 11, 2011.
Sundar Pichai, VP of Product Management for Google, displays a Samsung notebook running on the Chrome operating system at the Google IO Developers Conference in San Francisco, May 11, 2011.

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Mike O'Sullivan

The economic recession hit California hard in 2008 and 2009, and parts of its economy remain dismal.  The state's unemployment rate, at almost 12 percent, is nearly three points higher than the national average, and California's real estate market is one of the nation's worst.  But there are areas of improvement in the nation's most populous state.

California's economy is still huge, even though recession has slowed growth.  If California were a country, it would have the world's eighth largest economy, with farming, high technology, manufacturing, entertainment and tourism.

International trade is rebounding.  It increased dramatically last year.  Economist Nancy Sidhu of the Los Angeles County Economic Development Corporation says the state's high tech sector is also doing well.

"[That success is due in part to] new Internet applications, new applications for mobile phones, and of course, social media," noted Sidhu.  "And those companies, Apple and Google, and you name them - all of the others that follow. They're hiring.  They're looking for the best and the brightest."

Retail sales have partially made up the losses of the recession, and some consumers are buying again.  But wholesale merchant Liang Liang is caught between high costs and low demand.  He says his imported home decorations and tourist souvenirs are not yet selling well, and his cost for cotton T-shirts has risen 25 percent since January.

"Yes, still very bad, I think.  For me, it's still very bad," said Liang.

Temporary workers are finding jobs and those who provide professional services, including lawyers and accountants, are doing better.  Film production is up, and some in the movie industry are getting work now.

But California's problems include crowded highways and aging rail lines, air and port facilities.  The state ranks near the bottom of the U.S. states in its infrastructure, says economist Susanne Trimbath, who is working on a national study with the U.S. Chamber of Commerce.

She says farm products - whether fruit from the West Coast or corn from Nebraska - sometimes travel a round-about route because of infrastructure failings.

"That has to move from the field on a truck to a train depot, where it then moves to the ports, and in some cases, it's traveling from 500 to 1,000 miles south because before they're able to move it north because we don't have the inter-modal connectivity in transportation infrastructure that we need in the United States to remain globally competitive," Trimbath explained.

Analysts say California's biggest problem is its bleak real estate market, which is dragging down the economy and has led to lower tax revenues, hurting local governments and schools.

Some investors in Silicon Valley are doing well, however, and more than $6 billion in unexpected tax income will help address the state's huge budget deficit.  California still needs nearly $10 billion to close its budget shortfall, and many teachers and government workers are facing layoffs.  

Business analysts say that beyond short-term fixes, California must deal with its long-term problems to stay competitive, securing stable funds for schools and other services and upgrading its infrastructure.

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