The 'California Comeback' Masks a More Bleak Reality

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Following the Employment Development Department's release of California's March 2014 employment numbers, the Legislative Analyst's Office (LAO) published an analysis of the employment growth in California, which showed March 2015's growth accounting for 30% of national job growth (despite the state accounting for 12% of the nation's population). Those who prescribe to the "California comeback" motto immediately used the LAO's analysis as vindication.

But aggregate economic statistics rarely tell the whole story. In fact, cherry-picking statistics tend to warp the policy discussion usually leading to false conclusions and masking important warning signs. For instance, taking the 12-month average (versus just the March 2015 data) shows California's share of monthly national job growth is roughly 15% - in line with the state's share of population.

What struck me as noteworthy wasn't the LAO's California share of monthly growth chart, but rather the analysis' first California map, which depicts a stark and concerning reality about the state's job market; it is perilously reliant on one region: the Bay Area/Silicon Valley. This is concerning because it's a relatively recent reality.

Population Growth: According to the Department of Finance, California grew by 0.9% between 2013 and 2014.
Meanwhile, the six counties that make up the Bay Area/Silicon Valley region (Marin, San Francisco, Contra Costa, Alameda, San Mateo, and Santa Clara) grew by 1.3% - almost 1 ½ times as fast. As a result, the Bay Area/Silicon Valley region is increasing its share of California's population. For comparison, Los Angeles grew slower than the state as a whole (0.8%) and the county's share of the state's population is trending in the opposite direction. At face value, this isn't that important, but combined with California's job market reliance on the Bay Area/Silicon Valley region this means an increasing portion of California's population is reliant on the economy of just one region.

Job Market as Share of California Market: Prior to the Great Recession, the Bay Area/Silicon Valley region accounted for 17% of the state's labor force and employment and about 14% of the state's unemployment. As of March 2015, the region now accounts for 18% of the labor force, almost 19% of California's total employment, while only 12% of the state's unemployed. The dynamics behind California's job market are not healthy. It is stacking the unemployed elsewhere, while shoving the jobs into one region. For instance, Los Angeles went from representing 28% of California's employment to 26%, and 25% of the state's unemployed to almost 30%. Los Angeles now underperforms (relative to its share of the population) on both jobs and unemployment, while the Bay Area/Silicon Valley region is greatly over-performing.

California's Job Market without the Bay Area/Silicon Valley Region: California wasn't always so reliant on the Bay Area/Silicon Valley. In fact, between 1990 and November 2007, excluding the Bay Area/Silicon Valley region actually improves California's labor force and employment growth (relative to the United States) by almost 8 points. Since the Great Recession, that relationship has completely reversed. Without the Bay Area/Silicon Valley region, California's labor force and employment growth (relative to the nation) decreases by approximately 2 points. In fact, the Bay Area/Silicon Valley has accelerated California's unemployment decline (relative to the pre-Great Recession) by almost 8%. This reliance on one region is unlike much of California's economic history.

Breaking down the data beyond aggregate numbers highlights the necessity of paying attention to warning signs. Don't get me wrong; it is a very good thing - for California, the country, and the world - that Bay Area/Silicon Valley region is doing as well as it is. But when the region's success conceals the economic misfortune of others and policymakers make decisions based on those masked statistics, the region's success can beget its demise (i.e. Sacramento blithely continues to pass burdensome regulations ignorant of their effects) and leave California without a back-up plan if something were to cripple the region - either economically (i.e. another dot-com bubble) or geographically (i.e. a natural disaster similar to the 1906 San Francisco earthquake). When governing a state as diverse as California, policymakers must always think about how parts amount to the whole and we weary of significantly relying on any one segment.


Carson Bruno is the assistant dean for admission and program relations at the Pepperdine School of Public Policy. Follow him on Twitter @CarsonJFBruno.

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