Palo Alto, CA. November 14, 2006. The California economy has a strong position in many fast-growing, high-wage industries and will have significant opportunities during the next ten years, according to a long-term economic outlook for the state released today by the Palo Alto–based Center for Continuing Study of the California Economy (CCSCE). However, the state faces a number of daunting challenges in converting these opportunities to growth in jobs and income for California residents.

The state is expected to add 3 million jobs, 5 million residents, and 2 million households during the next ten years. “California has the industries that should allow the state to outpace the nation in job and income growth,” said Stephen Levy, CCSCE’s director. “The question is whether residents and political leaders are committed to making the state a great place to live and work. Doing so would enable the state to take advantage of its substantial economic opportunities.”

The state’s economic strengths include:

• Technology—where California gets more than 45% of the nation’s venture capital funding, 25% of patents, and more than 20% of all jobs and production.

• Foreign trade—where growth exceeds 10% per year and where California accounts for 50% of the trade with China, the nation’s fastest-growing trade partner.

• Fast-growing, high-wage service jobs like computer, design, architectural, R&D, Internet, and management services—where the state has an above-average and rising share of national jobs.

• Tourism and entertainment—including Hollywood and the world’s largest variety of tourism and convention attractions.

The state’s 5 million added residents will be concentrated in two age groups, according to CCSCE’s projections. More than half of the added population growth will be among residents aged 55 and above. “This is the decade when the aging of the baby boomers hits home,” Levy said. “It will have significant effects on housing and workforce trends in California.”

The rest of the growth will be in the 20-35 age group, which will grow by approximately 1 million residents as the children of baby boomers enter college and the workforce. The concentration of growth in these two age groups should change the type of housing that consumers demand. The shift will be toward smaller homes and apartments, as these groups do not have large families.

Workforce changes will be equally dramatic as immigrants and their children and grandchildren replace retiring baby boomers. The report cites the USC Demographic Futures Project finding that 100% of the growth in California’s workforce during the next 25 years will come from immigrants and their children.

“The challenges facing California remain substantial,” Levy said. “The recently approved infrastructure bonds are only a down payment on the billions of dollars in additional spending needed to make the state’s infrastructure world class. Future rounds of investment will probably also require new taxes or fees.”

The report cites expensive housing, concerns about education, long-term budget shortfalls, and how the state accommodates the growing number of immigrants as significant challenges in addition to infrastructure. Levy wonders whether Californians will be willing to fully educate the children of immigrants and whether residents will continue to support the next rounds of public investment if they require new taxes.

For additional information on California’s economic outlook, contact CCSCE or visit www.ccsce.com. CCSCE’s current report, California Economic Growth – 2006 Edition, is available by subscription from CCSCE.

ABOUT CCSCE:
The Center for Continuing Study of the California Economy (CCSCE) is an independent, private economic research organization founded in 1969. It specializes in analysis of long-term economic trends and related public policy issues in California’s regions.