Australia is now in its 28th consecutive year without a recession. The population of Australia is pushing 25 million, almost the same as the population of Southern California.
Why can’t we in Southern Californians emulate Australia?
After all, we have the same weather, the same oceanfront, the same mild temperament and the same zest for life – and we have Teslas.
On a daily basis, I track the state of Southern California and, of course, the Nation. I recognize that despite our status as a “world of its own”, southern California is very much part of the United States and the state of California.
Open up Those Golden Gates: 40 Million and Counting
California is home to one of every eight persons in the nation. By the end of this year, we will have reached a booming population of 40 million (larger than Canada). We are responsible for one of every eight new cars sold in the Nation and hold one of every eight jobs. We’re big and getting bigger if not better every day.
But let’s stop and look at the National economy. It’s almost scary. For more than a decade we have been on an upward bent.
- In the past decade, the U.S. has added 10 million jobs and has seen its unemployment rate plummet from 10.0% to 3.4%.
- In 2010, the U.S. reported 3.0 million job openings. Now it’s 7.0+ million.
- Inflation remains modest: the 2.0% range.
- For the past six years, the U.S. has sold 17 million new cars each year, a wonderful indicator of consumer confidence. A decade ago, the average new car sold was $22,000 and this year $37,500. Love those Escalades and Rams. (We rarely ask why every American needs an extended crew cab)
- Most obviously, the price of money has declined significantly and FHA 30-year fixed rate mortgages can be obtained in the neighborhood of 3.0%. And they offer very low down payments. Or how about 2.75% for a 15 year fixed. It’s virtually free money and there is lots of it to spread around.
- The Gross Domestic Product (GDP) – the sum of all goods and services sold – is in the 2.5-3.0% annual growth range (not quite as good as in the last recovery, but still acceptable).
- Retail sales continue to blossom as Americans enjoy higher household incomes and remain confident in the economy. Indicative of this is stock prices. This year Target, Walmart and Amazon are up 24.4%, 67.5% and 18.9% respectively. Sorry Sears.
Where Do We Put the Next 40 Million?
There is, however, one weak spot, especially in California – and that’s our housing market.
Nationally, resales are smooth and on track to hit 5.4 million in 2019, about the same as last year. The California resale market is doing well (we’ll probably top 400,000 resales this year).
The predictable weak spot: new home construction. If that industry were perking along at a more aggressive pace, the economy would really be on fire, but it isn’t.
In California, we are on track to build 100,000 units, 60,000 single family and 40,000 multi-family in 2019. That’s better than in the great recession, but then again California has added 2.7 million persons since then.
In the world of new commercial construction and infrastructure spending, California is doing rather well with a binge of hotel, office and industrial construction. And a lot of infrastructure.
As a final note, let’s look at the state’s revenues. So far, year over year, personal income revenues are up 6.7% and corporation revenue is up 33.2%. Something has to be right in California.