5786.05_Economy and Jobs Report_Q4_Template_Web - Main California

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Growth: California Continues to Outpace the U.S.

The California economy continues to grow at a faster rate than the U.S. economy as a whole.

In the final three months of 2016, California's gross state product grew by 2.8 percent in annualized terms, eclipsing the corresponding U.S. growth rate of 2.1 percent.

For all of 2016, California recorded a growth rate of 2.4 percent, compared with 1.6 percent for the nation as a whole. This is the fifth consecutive year in which California has outperformed the U.S.

All signs point to continued growth for the state in 2017, with job gains expected in most sectors of the California economy and across the state's regions.

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Employment: Pay on the Rise as Full Employment Nears

The big story for California's economy in recent quarters is the acceleration of wage gains – from the end of 2015's third quarter to the end of the same quarter in 2016, the state's average weekly wage jumped 7.1 percent.

That increase is nearly as large as the combined gains of the previous two years in California and considerably ahead of the national gain of 5.7 percent over the same period.

The context is an economy approaching full employment. The California labor market kept its edge in early 2017, with a 1.9 percent employment gain for the 12 months that ended Feb. 28, 2017, compared with 1.6 percent for the U.S. as a whole.

While that represents a modest slowing of the pace of job growth in recent years in California, it was enough to push the state's unemployment rate to a 10-year low of 5 percent.

Industries that contributed to California's job gains in recent years continued to be pillars of growth in the state in early 2017. Between February 2016 and February 2017, health care and social assistance scored the biggest private-sector increase, adding 69,300 jobs. Also notching impressive gains were leisure and hospitality (48,900 jobs) and accommodation and food services (42,900).

The news was not uniformly positive. California's largest employment category, manufacturing, lost 9,600 jobs in the same period.

Job gains were well distributed across the state's metro areas:

  • The Inland Empire led the state with a 3.2 percent yearly gain in jobs, with Fresno following at 2.9 percent and San Francisco at 2.7 percent.
  • The growth rate for Los Angeles was just 1.7 percent, but the city's absolute gain of 75,000 jobs led the state.

For 2017, expect California to continue to add jobs, but at a slightly slower pace than last year. A tight labor market will drive wage gains. Wage gains and continued spending by California businesses will contribute to increases in taxable sales through the end of the year.

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Entertainment: More Consumer Spending a Boon to Hollywood

Gains in household income nationally have fueled consumer spending. Both box-office and home entertainment spending have reached new highs, spurring job growth in the entertainment industry.

California's motion picture and sound recording industry posted job growth of 13.5 percent between 2015 and 2016, the strongest annual employment gains in nearly three decades. The Los Angeles metro area, which accounts for nearly nine out of 10 jobs in this sector, saw concentrated year-to-year job gains of 16.9 percent.

There is a seeming paradox at work, however. Despite the industry's rapidly rising payrolls, average annual wages in entertainment sector jobs fell 2.6 percent between the third quarter of 2015 and last year's third quarter. The explanation for this may rest, at least in part, with the “gig" based and variable nature of motion picture employment.

Ticket sales in the U.S. and Canada rose 2 percent in 2016, according to the MPAA. Globally, however, box office receipts were flat, with strong gains in the Asia Pacific region (up 5 percent year-to-year) offset by falling revenues elsewhere.

Films that grossed the highest revenues over the course of 2016 included “Finding Dory," “Captain America: Civil War," and both new additions to the “Star Wars" franchise (“The Force Awakens" and “Rogue One"). “The Force Awakens" ranked as the third-highest grossing film of all time.

Home entertainment spending amounted to $18.3 billion in 2016, a gain of 1.4 percent on the year. While overall growth continues, the mix of media consumption is changing significantly.

  • DVD and other product sales are down 9.6 percent year-to-year.
  • Kiosk rentals fell 17.2 percent in the same period.
  • Network subscriptions, such as Showtime or HBO, continue to lose ground, down 16.9 percent on the year.
  • In contrast, streaming services (Netflix, for example) are up 15.2 percent.

Net production levels rose across the industry last year, with the California Film and Television Program and associated tax credits widely lauded for their role in strengthening overall production values in Los Angeles. The state legislative analyst's office has concluded that without the program, two-thirds of funded projects would not have happened, or would have taken place outside of California.

FilmLA Inc., which oversees film permitting in the greater Los Angeles area, reported 39,605 shoot days in 2016, up 6.2 percent over 2015. However, film days dipped 2.1 percent in the first quarter of 2017 compared to the beginning of last year, according to Film LA’s most recent report published April 12. Television remained dominant in 2016, accounting for 41.6 percent of shoot days. Within the television category, production levels for web-based series posted the strongest annual increase, gaining 45.8 percent.

Los Angeles continues to be the prime destination for high-profile commercials – it accounted for 54 percent of the 69 Super Bowl commercials aired early this year.

For television, recent trends are not so rosy. In fact, overall TV pilot production dropped 15.5 percent in the first quarter from the first quarter of 2016. This sends mixed signals as TV pilot production in Los Angeles rose 15.7 percent in 2016. And while Los Angeles still continues to lead new pilot production, with a 40.2 percent share of all new pilots filmed in 2016, a number of rival cities (including Vancouver and New York) have been gaining ground, reflecting the growing accessibility of film technologies and competing tax incentives.

Los Angeles has long claimed the title of entertainment capital of the world. With the Los Angeles County concentration of entertainment industry employment at more than 11 times the concentration for the U.S. as a whole, the claim continues to hold up.

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