An excellent analysis from Joel Kotkin in New Geography.
As its economy started to recover in 2010, progressives began to hail California as a kind of Scandinavia on the Pacific — a place where liberal programs also produce prosperity. The state’s recovery has won plaudits from such respected figures as The American Prospect’s Harold Meyerson and the New York Times’ Paul Krugman.
Gov. Jerry Brown, in Bill Maher’s assessment, “took a broken state and fixed it.” There’s a political lesson being injected here, as well, as blue organs like The New Yorker describe California as doing far bettereconomically than nasty red-state Texas.
But if you take a look at long-term economic trends, or drive around the state with your eyes open, the picture is far less convincing. To be sure since 2010, California’s job growth has outperformed the national average, propelled largely by the tech-driven Bay Area; its 14% employment expansion over the past six years is just a shade below Texas’. But dial back to 2001, and California’s job growth rate is 12%, less than half that of Texas’ 27%. With roughly 10 million fewer residents, Texas has created almost 2.8 million jobs since the turn of the millennium, compared to 2.0 million in California.
Even in the Bay Area, the picture is less than ideal. Since 2001, total employment in the San Francisco area has grown barely 12% compared to 52% in Austin, 37.8% in Dallas-Ft. Worth, 36.5% in Houston and 31.1% in San Antonio. Los Angeles, by far California’s largest metro area, scratched out pedestrian job growth of 10.3%, slightly above the national increase of 9.3% over that time span.
Remarkably, despite the recent tech boom, California’s employment growth in science, technology, engineering and mathematics-related fields (aka STEM) since 2001 is just 11%, compared to 25% in Texas. Both Austin and San Antonio have increased their STEM employment faster than the Bay Area while Los Angeles, California’s dominant urban region and one-time tech powerhouse, has achieved virtually no growth. This pattern also holds for the largest high-wage sector in the U.S., business and professional services.
Geographic Disparity: Relying On Facebook
“It’s not a California miracle, but really should be called a Silicon Valley miracle,” says Chapman University forecaster Jim Doti. “The rest of the state really isn’t doing well.”
This dependence on one region has its dangers. Silicon Valley has only recently topped its pre-dot-com boom jobs total, confirming the fundamental volatility of the tech sector. And there are clear signs of slowing, with layoffs increasing earlier in the year and more companies looking for space in less expensive, highly regulated areas.
Consolidation and dominance by a few giants like Google, Facebook, Apple threaten to make Silicon Valley less competitive and innovative, as promising start-ups are swallowed at an alarming rate. Even Sergei Brin, a co-founder of Google, recently suggested that start-ups would be better off launchingsomewhere else.
Housing poses perhaps the most existential threat to the Bay Area, particularly among millennials entering their 30s. Only 13% of San Franciscans could purchase the county’s median home at standard rates and term. For San Mateo, the number is 16%. No surprise that as many as one in three Bay Area residents are now contemplating an exit, according to an opinion poll this past spring.
Outside the Bay Area, where tech is weaker, the situation is much grimmer. In Orange County, the strongest Southern California economy, tech and information employment is lower today than in 2000. In Los Angeles, employment has declined in higher-wage sectors like tech, durable goods manufacturing and construction, to be replaced by lower-wage jobs in hospitality, health and education. A recent analysis by the Los Angeles Economic Development Corp. predicts this trend will continue for the foreseeable future.
Perhaps nothing undermines the narrative of the California “comeback” more than the state’s rising inequality. A recent Pew study found California’s urban areas over-represented among the metro area where the middle class is shrinking most rapidly. California now is home of over 30% of United States’ welfare recipients, and almost 25% of Californians are in poverty when the cost of living is factored in, the highest rate in the country.