Monthly Archives: March 2012

California Leads in Solar Power Development

More evidence of California’s lead in Green Tech investment.

The Sacramento Bee article Gov. Jerry Brown’s solar power campaign  (Mar. 24, 2012, by David Siders), describes some of the challenges facing California’s solar power industry.

“It’s not for the faint of heart. Scientific and technological progress moves by trial and error.” –Jerry Brown, speaking about the solar industry

  • “California has more utility-scale utility projects operating, under construction or in development than the next four states combined.”
  • Renewable electricity sources currently supply about 10,000 megawatts—16% of the state’s total power supply
  • In 2010 and 2011, permits were approved for renewable energy projects to supply about 16,000 more megawatts

(Read the article)

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From Econbrowser: Why do gasoline prices differ across U.S. states?

In his post Why do gasoline prices differ across U.S. states?, James Hamilton at Econbrowser does a great job of explaining what drives regional variations in gasoline prices.  Along the way, he provides some insights and a good explanation for California’s habitually high gasoline prices.

  •  “California motorists pay 86 cents/gallon more than the folks in Wyoming”
  • “The tax on a gallon of gasoline in California is 35 cents higher than in Wyoming”
  • “Motorists in California… are required to use a higher-quality fuel in order to help limit air pollution.”
  • Another important “factor is differences in the cost of crude oil available to refineries in different parts of the country.”

The post includes some great graphics like the one above and links to valuable information and analyses.

(Read the article)

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Off Topic: Sleepless Economists?

By Dennis Meyers

This has little or nothing to do with the outlook for California, but a puzzling factoid appeared in the news recently.

“According to the research that was conducted by the Center for Disease Control and Prevention’s National Health Interview Survey …Police officers, physicians and economists rounded out the top five most sleep-deprived careers.”  (read the article)

The top two most sleep deprived occupations were home health aides and lawyers.  Following economists were social workers and computer programmers.

Even though this puts economists in good company, its not clear to me why the economics profession ranks so high in this category.  Maybe its a guilty conscience over our forecasts that are always wrong.  The survey could also have included an inordinate number of Wall Street economists, which makes this conclusion very understandable.

Any other hypotheses would be welcome.

Top seven most sleep deprived occupations:

  1. home health aides
  2. lawyers
  3. police officers
  4. physicians
  5. economists
  6. social workers
  7. computer programmers

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California Economic Update, March 2012

 The Department of Finance released its March 2012 Finance Bulletin which includes the following review of the latest economic indicators for California.

ECONOMIC UPDATE

For the California economy, 2012 got off to a slow start.  Employment indicators were contradictory—a small loss of nonfarm jobs, but the unemployment rate improved.  Construction activity slowed, as did the real estate market.

LABOR MARKET CONDITIONS

The labor market report for January was mixed, but was basically positive news.  The unemployment rate dropped.  Nonfarm employment fell, but if you look at the details underneath the headline number, the picture looks better.

California nonfarm payrolls fell by 5,200 jobs in January—the first month-over loss after five consecutive job-gains totaling 185,500.

On the other hand, private payrolls grew by 2,600.  The government sector suffered an unusually large drop in federal employment and a loss in local government (mainly local education) employment.   Private sector job growth accelerated over the last several months, adding 21,700 jobs per month on average since June 2011.

Six major industry sectors gained jobs and five lost.  The largest gains were in trade, transportation, and utilities (14,400), driven by a very large gain in retail trade employment.  Other gains in January included construction (8,900), professional and business services (7,500), leisure and hospitality (2,400), manufacturing (1,700), and mining and logging (500).

January’s losses were led by an unusually large 22,900-job decline in information—the largest one-month drop on a record dating back to 1990.  Other losses in January included government (7,800), educational and health services (7,300), other services (1,500), and financial activities (1,100).

California’s unemployment rate fell 0.3-percentage point to 10.9 percent in January—the first time the rate has been below 11.0 percent since April 2009.  The rate fell by 1.2 percentage points over the year.  The January rate was 1.5 percentage points lower than its recessionary high of 12.4 percent in July-October 2010.

In January, the number of employed Californians rose by 27,800 (and by 307,200 over the year).  The number of unemployed Californians fell by 40,600 (by 203,200 over the year).

BUILDING ACTIVITY

Home building slowed sharply in January, with the pace of permitting falling 24 percent from December—the second consecutive month-over-month slowdown.  In January, residential permits were issued at a seasonally adjusted annual rate of 40,230 units, down over 23 percent from a year earlier.

Single-family permits were down 18.2 percent, while multi-family permitting was down 29 percent.

Nonresidential building slowed slightly from December, but was up over 2 percent on a year-over-year basis.

For the four months ending with January 2012, nonresidential permitting grew over 21 percent from the same months a year earlier.  Nearly half of this growth came from alterations and additions.

REAL ESTATE

Residential real estate conditions softened at the beginning of 2012.  Sales of existing, single-family detached homes in January totaled 517,740 units at a seasonally adjusted annualized rate in January, slowing 5.7 percent from January 2011.

The median price of existing, single-family homes sold in January slid to $268,280, down 3.9 percent from a year earlier, due to an a increase in distressed home sales,

California’s unsold inventory index ratcheted up to 5.5 months in January, from 4.1 months in December 2011.  Likewise, the median number of days needed to sell a home rose to 61.9 days, up nearly 3 days from December.

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The Declinists are Wrong, Part 1

By Dennis Meyers (Twitter: @goldstateoutlok)

The report of my death was an exaggeration.” Mark Twain

With your help, that’s what we’ll do … prove the declinists wrong once again.” Governor Jerry Brown

California has attracted more than its share of negative press over the last several years, much of it driven by the state’s beleaguered housing markets and by ongoing state and local government fiscal problems.  These issues, though, obscure the fundamental strength of the Golden State’s dynamic and vibrant economy.

To rectify this situation, this post and three others to follow will highlight California’s exceptional assets.

  • Part one below shows that California is a big state with a big diverse economy to match.
  • Part two will illustrate that on average, compared to the rest of the nation, Californians is a wealthy and prosperous place.
  • Part three will describe why California is a leader in innovation, which derives from the fact that Californians on average are well educated.
  • Lastly, part four will show that, despite the current frustration over the state’s fiscal situation, the state budget is not as burdensome as many believe.

Part 1: California is a Big State with a Big Economy

In 2011, California’s was home to 37.5 million residents—12 percent of the total U.S. population. It is by far the most populous state in the nation—42% larger than the next largest state, Texas.

California has grown about twice as rapidly as the nation in recent decades, averaging over 18 percent growth for each decade between 1950 and 2010. Although California’s population growth has slowed since the 1980s, it is still expected to grow by roughly one percent annually over the next ten years.

California’s economy, the largest among the 50 states and one of the largest and most diverse in the world, has major components in high technology, trade, entertainment, agriculture, manufacturing, government, tourism, construction, and services.  If it were a country, California’s economy would be the 9th largest in the world.  As with its population, California is considerably larger than 2nd ranked Texas.  However, the gap has been closing in recent years.

California accounts for almost 11 percent of the nation’s nonfarm workers—Texas accounts for 8 percent.  As a wealthy state, California accounts for a disproportionately larger share of the nation’s personal income—13 percent—while Texas accounts for a disproportionately smaller share—7.7 percent.

On the other hand, California lost its lead as the nation’s leading exporter in 2002 and is now second behind Texas.  California accounted for about 11 percent of the nation’s exports during the first three quarters of 2011, whereas Texas accounted for 17 percent.

The principal explanation for  California’s high incomes is that it specializes in many of the leading high-paying high technology industries.  For instance, as a share of the economy, computer manufacturing is nearly four times larger in California than in the nation as a whole.

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