We’re No. 6.
Riding the latest high-tech boom and an overall statewide surge, California has leapfrogged France and Brazil to become the world’s sixth-largest economy, according to figures released Tuesday by Gov. Jerry Brown’s administration.
Using data from the International Monetary Fund and the U.S. Bureau of Economic Analysis, the state Department of Finance said California jumped ahead two spots in the annual rankings in 2015, up from No. 8 the year before.
Economists cautioned against making too much of the global rankings, which seesaw from year to year and can be influenced by such factors as fluctuations in currency valuations. The strength of the dollar vs. the euro, for instance, was part of the reason why California jumped ahead of France last year.
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Nonetheless, the numbers do reflect California’s comparatively healthy economy at a time when much of the rest of the world is struggling, said economist Jeff Michael of the University of the Pacific.
“It’s a statement of the size and significance of the state’s economy to the world, and the United States,” said Michael, director of the university’s Center for Business and Policy Research. “It speaks to California doing relatively well in a sluggish global economy.”
As recently as 2012, the state had fallen to 10th in the global economic rankings because of the lingering effects of the recession and the housing market slump. Since then, California’s economic growth has been among the tops in the country, cutting the unemployment rate roughly in half. The rate was 5.3 percent in April, the most recent data available.
“We were No. 10, but the recovery has been really good to us,” said Irena Asmundson, chief economist at the Department of Finance.
For all the good cheer, California does face some warning signs. Michael said much of its recent economic growth has been concentrated in Silicon Valley and San Francisco, leaving the state vulnerable in case the tech economy sours. Exports have already suffered because of slowdowns being experienced by some of California’s most important trading partners.
Economic consultant Chris Thornberg, however, disputed the idea that California’s economy has become overly reliant on the Bay Area. He noted, for instance, that Los Angeles County employers have created more jobs in the past year than those in San Francisco and Silicon Valley combined: 107,000 compared with 84,200, according to the Employment Development Department.
“I think the state’s doing well,” said Thornberg, founder of Beacon Economics in Los Angeles. “This is a very broad-based pace of growth.”
Gov. Brown has repeatedly warned of a coming economic slowdown, noting that the surge in tax revenues in recent quarters has begun to subside.
“Things don’t last forever,” he told reporters in a budget briefing last month.
Michael said he thinks the state’s economy is still solid, “but I understand the warnings. … We’re connected to the global and national economy and there are risks there.”
For the time being, however, California’s economic growth has been undeniably strong when compared with the rest of the country. Last year California’s economy grew by 4.1 percent when adjusted for inflation, Asmundson said. The U.S. economy grew at a 2.4 percent rate.
“We’re doing a heck of a lot better than Texas,” Thornberg said, citing the state’s sometime rival for jobs.
As for the global rankings, the overall U.S. economy was No. 1 last year at $17.95 trillion. China was No. 2 at $10.98 trillion, followed by Japan, Germany and the United Kingdom.
California was next at $2.46 trillion. France dropped to No. 7, followed by India and Italy.
Brazil, gripped by a deep recession, tumbled all the way to 10th.
Thornberg said the annual global rankings are essentially meaningless because they’re so deeply affected by currency fluctuations. Last year’s strength of the dollar helped push California past France. But this year the euro has regained much of its strength against the dollar.
“We’re a big economy,” Thornberg said. “If we’re 6 or 9, is it really that important?”