California’s economic revival has sparked widespread notions, shared by Jerry Brown and observers elsewhere, that its economy — and policy agenda — should be adopted by the rest of the country. And, to be sure, the Golden State has made a strong recovery in the last five years, but this may prove to be far more vulnerable than its boosters imagine.
The driver of the latest California “comeback,” the Silicon Valley-San Francisco tech boom, is beginning to slow in terms of both job growth and startup activity. The most recent job numbers, notes Chapman University economist Jim Doti, show that employment growth in the information sector has slowed over the past year from almost 10 percent to under 2 percent. Particularly hard-hit is high-tech startup formation, which is down by almost half from just two years ago.
This slowdown extends also to the professional business services sector, which has become increasingly intertwined with tech. In a recent survey of professional business service growth for Forbes magazine, economist Mike Shires and I found that last year Silicon Valley and San Francisco growth rates were considerably lower than those in boomtowns such as Nashville, Tenn.; Dallas, San Antonio and Austin, Texas; Orlando, Fla.; Salt Lake City and Charlotte, N.C. With the exception of Orange County, the rest of Southern California performed below the national average.
The historical perspective
Historically, California’s great strength was the diversity of its economy, stretching from high-tech and aerospace to finance, entertainment, energy, basic manufacturing and homebuilding. Yet, during the most recent boom, the growth of high-wage job growth largely took place in one region — the Bay Area — while other sectors generally stagnated or shrank.
Silicon Valley and its urban annex, San Francisco, have brilliantly expanded the scope of the digital revolution. Google and Apple have become the world’s most valuable companies, and the Valley, along with Puget Sound in the state of Washington, account for four of the 10 wealthiest people on the planet, and virtually all of the self-made billionaires under 40.
This success has masked greater problems in the rest of the state. Southern California, home to over half the state’s population, has seen only modest high-wage job growth, both in tech and business services, since 2000.
Read the entire piece at The Orange County Register.
Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.
Photo by Coolcaesar at the English language Wikipedia [GFDL or CC-BY-SA-3.0], via Wikimedia Commons
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