Signs Indicate California Recovery Will Last
Posted Aug. 30, 2014, 8:55 am
Tom Elias / Mirror Columnist
There are still skeptics who maintain the California economy remains in recession, that talk of economic recovery amounts to whistling past the proverbial graveyard when unemployment remains above 7 per cent.
Gov. Jerry Brown labeled these folks “declinists” two years ago, when unemployment was much higher and the signs of recovery were not nearly as strong as they are today.
But those signs are now seemingly almost everywhere, even though a few major corporations are in the process of moving headquarters elsewhere.
For one thing, in midsummer, California – like the rest of America –finally had gained back all jobs lost in the recession of 2007-11. The new jobs may be in different places and of somewhat different types than those that were lost, but the fact is there actually has been a little bit of job growth since 2008, something that befuddles the declinists. The figures come from a report by the Federal Reserve Bank of Dallas.
Then there’s the fact that California lawmakers are starting to realize this state has serious competition for some of its key industries, with other states and even some foreign countries willing to grant large subsidies to companies that move headquarters or parts of their businesses.
One example is the upcoming move of Toyota’s national headquarters, complete with its sparkling museum of classic cars the company has produced since the 1930s, to a Dallas suburb. Not only will Toyota get large tax reductions for at least its first eight years in Texas, but it will pay far less for the land it needs than it figures to get when it sells the land it will vacate in the Los Angeles suburb of Torrance.
That’s standard procedure in many states. Louisiana, for example, has attracted large amounts of film and TV production not only because of its green scenery, but also because production companies save as much as 30 percent of their costs by going there. That’s through a combination of subsidized hotel rates and equipment rentals, tax relief and lower-priced labor. The same happens in places like North Carolina, Idaho and New York.
The first step in California lawmakers wising up came when the Legislature during the summer expanded and extended tax exemptions for movie and TV production here. Then they passed a bi-partisan bill sponsored by Democratic Assemblyman Steve Fox and Republican state Sen. Steve Knight, both of Palmdale, giving military contractors Boeing Co. and Lockheed Martin as much as $420 million in tax credits over 15 years for production of a new strategic bomber to replace the B-2, which was also developed largely in the Antelope Valley. In case they don’t get the Defense Department contract for that project, another bill with the same benefit for Northrop Corp. would provide similar help – about $28 million a year, or 17 percent of wages paid to manufacturing workers.
There has been reluctance here to subsidize big industries, one reason California has lost a lot of them to other states and countries. There is good reason for that hesitance, as subsidies raise questions of favoritism and special interest influence. But with others offering so much, California at least now realizes it must get into this game.
Then there’s venture capital, where the Silicon Valley this spring absolutely dominated the world scene. Fully 41 percent of all venture dollars invested around the world from April through June went to San Francisco Bay area startups, a big improvement from the first quarter, when places like Texas and Massachusetts drew significant investment.
But last spring, all of Europe got less than half what went to Silicon Valley, according to a report from PitchBook Data. The end result of this should be more companies headquartered in California, to join former startups like Google, Intel, Yelp and Twitter.
Put it all together and you get a dynamic picture of job recovery, the prospect of great job growth and a reborn determination to preserve what the state already.
That’s all bad news for the declinists who enjoy putting California down even while it pulls itself back up toward the golden stature it long enjoyed.