California and America’s Economy

California is the state which mostly bears American economy on its back. At the beginning of June 2016, it was the seventh-largest economy, while two weeks later it was announced as the sixth-largest economy in the world, surpassing France, thanks to a robust state economy and strong U.S. dollar. California has greater gross domestic product than Brazil. Also, the state had a 3.29 percent growth rate last year, five times more than that of Japan which is a third-largest economy, and almost twice more than Germany which is fourth.

It is known that California has Silicon Valley and Hollywood. But it is important to note that even manufacturing and agriculture have performed well despite a severe drought.

State Economies with the Fastest Growth in the First Three Quarters of 2015

During 2015 California created the most jobs than any other state – 483,000. This number is even higher than the following two states combined. Florida created 257,900 jobs and Texas 175,700. Besides, it is crucial to mention that the speed of employment growth was almost three times the rate of job creation in the 19 countries from the euro zone.

The high taxes and regulations for every business step critics mention when evaluating Golden State government. However, these do not seem to be the obstacle to business and investment. It is even beneficial. Four out of the world’s ten largest companies are based in California. Two of them were developed in the past 18 years such as Alphabet and Facebook. Besides, Wells Fargo located in San Francisco is the world’s largest bank by market capitalization, which performs even better than Wall Street.

Furthermore, California produces almonds, apricots, dates, figs, kiwifruit, as well as nectarines, olives, pistachios, prunes, and walnuts which make it top state in the U.S. GDP from agriculture, forestry, and hunting is more than $37.7 billion. GDP from manufacturing is around $255.6 billion.

Nevertheless, the situation in 2009 was a lot different with only one Californian company in top ten largest companies. 35 companies out of 500 largest in the world are based in California.

It is also important to note that California is one of those states which recognize the threat of global warming. In fact, there is no country which comes even near to California when clean energy companies are considered. They address these issues with policies that expand the opportunity to develop clean or alternative energy. 26 companies, among 127 from North America in the Bloomberg Americas Clean Energy Index, are based in California. The average revenue growth is 11 percent. It is necessary to mention that this is 2 percent more than the average in the same sector across the continent.

For instance, Texas has such three companies, with revenue growth of 2 percent. Therefore, during the 12 months, the clean energy companies based in California spend an average 25 percent of their income for different researches and developments to benefit the environment. They are trying to reach a median of 16 percent. Meanwhile, non-Californian companies spent an average of 13 percent and a median of 1 percent.

As a result, the payoff for investors who own the shares of clean energy companies in California is huge in comparison with returns from similar firms outside of California. California has an average gross margin of 42 percent, turning $100 of sales into $42 gross profit, while other clean energy companies offer a gross margin of 31 percent. Analysts consider that the shares of the California clean energy companies will reach 40 percent by the end of the first half of this year and that the non-California firms will possibly reach 23 percent.

People of California agree in one thing, and that is the need to take all possible actions against climate change. Their state was a victim of catastrophic drought which severed the agriculture. They believe that there is something they all can do to help the environment and the world we live in, while politicians mostly turn their heads on the other side.

The Jobless Rate in California Versus the United States of America

Despite the success in many branches, California continues to suffer from poverty and unbelievably high unemployment rates considering its economy. Unemployment is at 5.3 percent which is above the national average. On the other hand, the state’s jobless rate is falling faster than the rest of the country. Further, California’s per-capita income is rising as well, resulting in the greatest divergence since 1946. California is the 11th state in income per-capita, and since 2007 its income growth is leaving behind all of the top 5 per-capita-income states.

According to Bloomberg data, the interest rate on California securities in the market for state and local government debt, which is the lowest among the most-populous states. It is important to mention that the lowest borrowing cost is an expression of confidence. Besides, municipal bonds by California are around 1.68 percent, which means that California has less than the average cost of borrowing from all other U.S. municipalities and it is 17 basis points less. It is the greatest and most favorable advantage for the past five years when the difference between municipal bonds in California and other American municipalities. The biggest previous difference was 15 basis points. Therefore, Texas, for example, has to pay higher rates of interest on its debt than California, even though it has a higher credit rating.

Finally, we can be sure that the U.S. economy would not be significant if it were not for California.

However, the idea California´s creditworthiness is supported by global traders. Besides, it is important to mention that Governor Brown expects the slower rise in revenues as the economy cools. When it comes to the market for credit-default swaps California’s premium dropped the most of any state during the past five years. It is both recommendation and the invitation for all those investors who are trying to find the most suitable option for their companies. California is the state which is able to provide it.