California’s economy, like the United States overall, bounced back nicely after a slow start to 2014. The manufacturing, real estate, logistics and construction sectors all contributed to the state’s growth. Workers have benefited as job growth continues at a solid pace. These changes are reflected not just in the coastal cities but across the state, including portions of the San Joaquin Valley.

On the other hand, the slow pace of housing permits and falling home affordability suggest that California’s boom may start to slow once the remaining slack is removed from the labor market. Businesses will be hard-pressed to recruit mid-skilled workers in a state where the median price of a house is well over twice the national average.

Real Estate Is Key: The real estate and rental leasing industry was responsible for roughly one-quarter of California’s estimated 4% output growth in the second quarter of 2014. Business expansion has led to increased demand for commercial space, which has played a key role in boosting growth. California Employment Accelerates: Company payrolls increased at a 2.9% annual rate over the previous quarter. This is in stark contrast to the 1.2% annualized growth rate during the first three months of the year. The professional and business services sector was the largest contributor to the expansion. Inland Empire Comeback:Economic growth has expanded beyond California’s coastal areas and into the interior of the state. The Inland Empire posted the third highest growth rate of all Californian metropolitan areas. The Inland Empire also posted the fastest pace of home price expansion in the entire nation over the last year.
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