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California Grows Twice as Fast as U.S.
California’s economy continued to expand in the first quarter, growing at an annualized rate of 2.0%, nearly double the national economy’s sluggish 1.1% growth rate.
In 2015, California’s gross state product was $2.46 trillion, making the state the sixth-largest economy in the world.
Consumers are contributing to the persistence of growth in the state’s economy. U.S. Labor Department data for recent quarters shows that California nonfarm employees have been earning and working more, resulting in greater disposable income. This continued momentum was reflected in a 3.6% year-over-year increase in taxable sales for 2016’s first quarter.
California led all 50 states last year in economic growth, with gross state product advancing by 4.1% over 2015.
California Jobs: One in Five New U.S. Jobs Are Here
California added 461,100 jobs year over year for an employment growth rate of 2.9% as of June 2016. California’s job gains accounted for a remarkable 18.8% of U.S. job gains for the previous 12 months. The unemployment rate fell to 5.4% in June, down from 6.2% in June 2015.
Stockton, a city hit particularly hard by the 2008 financial crisis and subsequent recession, had the fastest job growth rate of all the state’s metropolitan areas – a 12-month gain of 4.2%. The Los Angeles metro area led the state with a gain of 113,000 jobs from June 2015 to June 2016.
Educational and Health Services outgained other industries in California, adding 105,200 jobs year over year in June. The Health Care and Social Assistance sector alone accounted for nearly one-fifth of the state’s new jobs.
Also high on the list were Professional and Business Services (93,700 new jobs), with most of the gains in Professional, Scientific and Technical Services (61,200 new jobs). Trade and Transportation, along with Leisure and Hospitality and the Government sector, all added more than 50,000 jobs year over year in June.
Looking ahead, California can expect continued job gains through the rest of the year. The state will continue to outpace the nation as a whole and the unemployment rate will fall.
- San Francisco – 3.5% job growth
- Stockton – 4.2% job growth, fastest of large cities
- Los Angeles – 2.7% job growth, most jobs added
- Anaheim – 3.1% job growth
Housing: Single-Family Permits Hit 9-Year Peak
The median price of an existing single-family home in June was $519,440, up 5.5% from one year earlier, according to the California Association of Realtors. Prices have generally made modest but steady gains since mid-2013.
On the supply side, existing home inventories have been lean and declining since February 2015 and currently stand at 3.2 months’ supply, matching the figure for June 2015 and down sharply from the state’s long-run average of six months.
While multifamily construction has staged a comeback in recent years, growth has ebbed in the past two quarters. The single-family segment of the market, on the other hand, has been marked by steady but modest gains with each passing quarter. Between multifamily and single-family construction, 23,300 new construction permits were issued in 2016’s first quarter. While this was 5.5% lower than a year ago because of a decline in multifamily activity, single-family permits rose to their highest level in nine years – indicative of improved health in housing markets across the state.
The decrease in overall residential construction holds true in most metropolitan areas in the Southern California area; however, Orange County saw modest gains at a 6.4% increase in permitting activity, year over year. In contrast, activity in parts of Northern California is picking up: Compared to last year, San Francisco has more than doubled residential construction this quarter, with strong gains specifically in multifamily permitting. The Oakland and Sacramento metro areas have similarly bucked the statewide trend.
California home prices remain high by national standards. Homeownership in the state was 54% in 2015, down from 60% 10 years earlier. The result has been to drive up apartment rents, which are up across the board in major California metro areas:
- San Francisco rental rates rose 7.9% year over year in the first quarter to $2,570, while vacancy rates rose to 4.6%.
- In Los Angeles, rental rates rose 5.5% year over year to $1,630, while the vacancy rate grew slightly to 3.2%.
- In San Diego, vacancy rates hovered at 2.9%, while asking rent rose 6.5% year over year to $1,595.
- In Orange County, rental rates rose by a relatively modest 3.7% to $1,753 despite recent increases in multifamily construction.
- Santa Cruz-Watsonville recorded the smallest rental increase – 1.4% to $1,786.