Friday, June 5, 2015

California vesus Texas Job Growth: 2015 update: Why is California doing so well?

In the first decade of the 21st century California struggled to create new sustainable jobs. The housing boom created jobs for a time, but those disappeared when housing went bust, leaving employment little higher than it had been in 2002.

One welcome surprise during the past few years has been how strongly Californian employment has grown. A state that some feared was headed for stagnation has shown it can still create a lot of jobs when times are good. It remains to be seen how many of the new jobs will survive the next downturn.

Northern California is currently enjoying another tech boom, and it is tempting to credit the Californian recovery to the success of Silicon Valley.  That however is not the whole story. California is a very large and diverse state. Los Angeles is a different economy from the Bay Area, and the Central Valley is different again.  To better understand things, I have looked at job growth by region using data for metro areas.

What I found was that the San Francisco area, which contains Silicon Valley, was only responsible for a fraction of the state's job growth. The Los Angeles area and the Central Valley also created lots of jobs.
If we look at employment growth per 1000 population the exceptional performance of the tech powered San Francisco area becomes clear. However, LA and the Central Valley are also doing well and compare favorably to the growth rates in other states over the same period.

Why is California doing so well? One reason is that it is a highly urbanized state, with few people living in struggling rural areas. Californian cities tend to be large, and nationwide larger cities tend to be more attractive to employers than small ones. Another point is that Californian wages are not particularly high, perhaps because of the housing bust.

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