If California were a nation, it would be the world’s fifth largest economy. Soon it could be the fourth.
The Golden State is on pace to overtake Germany for No. 4, according to an opinion column from Bloomberg News editor-in-chief emeritus Matthew Winkler. It became the fifth largest economy in 2015, surpassing the UK, France and Brazil.
California Governor Gavin Newsom was quick to take a victory lap Monday afternoon.
“While critics often say that California’s best days are behind us, the reality shows the opposite — our economic growth and job gains continue to drive the nation’s economy,” Newsom said in a statement. “California’s values and entrepreneurial spirit have driven this rise to become the fourth largest economy in the world, and we will continue to double down on the industries of the future, such as renewables and clean energy. I feel tremendous pride in California’s resilience, leadership and our formula for success.”
Winkler’s column says California’s corporate earnings trajectory has risen 147%, while its market capitalization has risen 117% over the past three years, compared to Germany’s 41% and 34%.
“The margin of Germany’s $4.22 trillion nominal GDP over California’s $3.357 trillion last year was the smallest on record and is disappearing, with Europe’s largest economy barely growing in 2022 and forecast to shrink in 2023,” Winkler wrote.
The Bloomberg column cited the difference between California’s top three industries (tech hardware, media and software) which have all seen significant sales increases over the past three years, while Germany’s top three (healthcare, consumer discretionary and industrial products) saw either marginal gains or declining sales in the same period.
The column notes that California is “punching above its weight on the world stage,” with job creation a particularly strong growth area for the state.
The unemployment rate fell to 3.9% in July, although it rose to 4.1% in August.
“The gap separating the state from the U.S. national rate of 3.5% is the narrowest since August 2021, and for the first time since 2006, California’s unemployment rate has fallen below Texas (the top two states for nonfarm payrolls),” according to the column.
The column comes as California Republicans argue that Democratic politics are contributing to the state’s decline. They point to an exodus of middle-income people from the state as evidence that California’s high tax burden and housing prices are driving people away.
The California Business Roundtable released its own analysis of the Bloomberg piece, arguing that the state’s high cost of living is leaving residents behind.
It pointed to a trade department index that analyzes purchasing power between different regions. In the so-called price parity index, California’s GDP by purchasing power would make it the 11th largest economy in the world.
“California’s competitiveness is hampered by the ongoing cost-of-living crisis. Although the state’s GDP may be higher, the high and rising costs of housing, energy, food and other necessities mean that the dollar here does not go as far as it does in other countries, the roundtable statement said.
This story was originally published 24 October 2022 16:26.