GUEST VIEW / JOHN O. WILSON : Pessmistic View of State’s Recovery Belies What’s Happening
New evidence suggests that California’s economy is adding jobs at a rate likely to topple the conventional wisdom of observers who had written us off. One conspicuous casualty of this evidence is Business Week magazine, which recently predicted that our gathering economic strength would “fizzle out.”
In fact, California’s economy is firing up. Revised employment data indicate that job growth since the depth of the recent recession is more than five times higher than previously thought. Moreover, Bank of America now forecasts that California will add 500,000 net new jobs between now and the end of 1996. That’s three times greater than what we had earlier projected.
Why?
According to the conventional view, California’s economy is still mired in a deep recession, with the only signs of employment growth occurring in the Central Valley. The rest of the state--particularly Southern California--will have to wait two years or more before growth returns.
This pessimistic view is based primarily on U.S. Bureau of Labor Statistics data showing that California lost 603,000 jobs during the recession that began in July, 1990, and bottomed out last December. Since then, according to the bureau data, California has added only 27,000 net new jobs--a small increase for an economy in which nearly 1.4 million people are unemployed.
But the Bureau of Labor Statistics’ so-called “establishment survey” clearly underestimates the job growth that has taken place recently in California. The survey is based on information obtained from 37,000 of the state’s larger, more established firms. Job growth produced by self-employment and new business ventures is not fully counted.
For the national totals covering all 50 states, the BLS attempts to correct for this undercounting by adding an adjustment factor each month. However, it does not make this adjustment each month for the data that cover individual states. Instead, it waits until the first quarter of each year and then revises the data for California and other states by using payroll tax receipts. That presents a far more accurate picture of job growth than does the establishment survey.
The California Department of Finance has recently estimated what the BLS revision for the first quarter of next year will look like. The results are striking. They suggest that the state’s economy is strengthening far more rapidly than most people suspect.
The department estimates that employment bottomed out in March, 1993--not December, 1993, and that since November of last year, employment has grown by 139,000--substantially more than the federal government’s estimate of 27,000. For the full year, job growth is likely to be more than 200,000.
Most of California’s new jobs are coming from services, particularly business services, as well as from recreation, motion pictures, health care, engineering and management consulting. Many of these new employment opportunities offer not only good wages but also economic security.
This data “will change dramatically the perception of the recovery in California,” according to David Hensley of Salomon Bros., a former director of the economic forecasting center at UCLA.
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California has been battered by defense cutbacks, corporate downsizings and a depressed commercial real estate market. We also have suffered the consequences of flagging tax revenues, regulatory excess and a series of natural calamities. Compounding all of these difficulties has been a bruising national recession.
Yet the history of this state is a lesson in resilience. New industries continue to take the place of old ones. Entrepreneurs are re-seeding the economy with new products and services. And the state’s diversity, its port facilities and its position on the Pacific Rim are enabling our producers to take full advantage of the tremendous growth and market liberalization taking place beyond America’s borders.
It’s time to give the California economy a fresh look.
