California is so big, and its industries are so diverse, that the state is something of a microcosm for the entire national economic picture.
In its latest weekly review of the economy, Wells Fargo takes a special look at the California economy and the bifurcated nature of the recovery. Rich areas where demand for real estate is high and tech is a big thing are hot. While interior regions associated with manufacturing and agriculture have seen mediocre comebacks.
The uneven nature of the economic recovery is evident across California, with the coastal areas largely enjoying stronger job gains, reduced unemployment and more robust gains in home prices. The interior parts of the state have not been as lucky, with meager job gains, stubbornly high unemployment rates and less of a rebound in home prices. Although overall conditions in the state are improving, a number of splits are evident; newer industries such as mobile devices, social media, search and cloud computing have taken off, while old mainstays such as agriculture, manufacturing and construction have struggled to regain traction.
Although geography and the distinctly different industry mix are responsible for much of the split economic performance in California, the Fed’s unconventional monetary policy has also played a major role. Low interest rates and the Fed’s continuous monthly securities purchases have helped fuel the stock market rally, which has disproportionately benefitted California’s wealthier areas and funneled billions of dollars into the state’s technology sector. The tidal wave of liquidity has made its way into the housing market, as big institutional investors have bought up distressed properties and repositioned them as rentals, sending home prices soaring in many areas across the state.
As you can see on the map, the Bay Area and parts of the coast are doing quite nicely, with sub-8% unemployment rates. Just a bit inland you have many counties with over 10% unemployment, and some with greater than 14% unemployment.
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