2017-04-07 / Community

Study: State’s economic edge starting to slip

By Rob McCarthy
Special to the Acorn

The economic advantage that California has enjoyed over the rest of the nation for a decade is slipping away, a new report says.

Matthew Fienup, executive director of the Cal Lutheran Center for Economic Research and Forecasting (CERF), predicts more slow growth for the U.S. and state economies.

His data suggests the California economy will expand between 2 and 3 percent this year, about the same as the nation’s.

“So the story is simple: continued slow growth,” Fienup said. “We see California and the U.S. well below potential.”

The CLU economist said the regulatory rollbacks and tax-code changes proposed by President Trump could help the state’s economy, but he isn’t confident that Congress and the White House will pass the legislation needed to put the changes into effect.

“We do not believe that the reforms discussed and tweeted about by the Trump Administration are actually likely to implemented,” Fienup wrote in CERF’s first quarter economic report.

Fienup said rolling back regulations and changing the tax code would be good places for federal policymakers to start. But even if Washington did “get its act together,” California would not be likely to benefit because of Gov. Jerry’s Brown’s defiance toward the White House, Fienup said.

Don Toussaint, executive vice president with Citizens Business Bank in Oxnard, attended a CERF briefing on March 29 at which Fienup told the audience to expect the “Trump effect” to be smaller than his supporters had expected.

“Even on the national level, Fienup doesn’t think the Trump effect will make that much of a difference,” Toussaint said.

Clean air

Gov. Jerry Brown has told the new president that California will ignore any regulatory rollback that weakens the state’s greenhouse emissions standards—considered the toughest in the nation.

On March 28, Trump issued an executive order that overturned Obama-era restrictions on coal-burning at U.S. power plants. The president also wants to roll back the state’s tough tailpipe emission laws.

But the California governor vowed earlier this year to keep its clean air standards in place through the next four years.

“California is not turning back. Not now, not ever,” Brown said in his Jan. 24 State of the State address.

Business exodus

Companies and employees continue to leave California for opportunities elsewhere, the CLU report said.

Fienup says Ventura County’s slow-growth laws have resulted in skilled labor being taken from the local economy. The Central Coast ranks last in the state’s in economic growth.

“The growth premium that California enjoys over the nation is shrinking. Decades of policy experimentation are having an effect. In addition, growth in state revenues has declined in recent months,” Fienup said.

Last month, Amgen gave notice to almost 500 of its Thousand Oaks-area employees that they would be either moved, reassigned or laid off as the company shifts positions to San Francisco, Boston and Tampa.

A company representative cited the availability of skilled labor and the cost of living as factors in the company’s decision.

Fienup disagrees with the U.S. Department of Labor’s upbeat unemployment reports.

He believes participation in the labor market is at the lowest level since 1978, and that scores of Americans have simply stopped looking for work.

Some are on extended unemployment or have gone on disability and disappeared from the weekly jobs survey, Fienup said.

Down the road

Despite the dark clouds, California doesn’t appear to be in danger of a recession, according the CLU data report.

“The indicators are positive,” Fienup said. “Just the magnitude is very, very low.”

Toussaint said he found the CERF outlook “contrarian” and worth considering.

Fienup's belief that jobs creation and the overall U.S. economy are weak goes against prevailing opinion, Toussaint said.

“I listened to their arguments and agreed with them,” he said.

Fienup raises another concern for California’s government and economy. Gov. Brown is facing a $1.6-billion budget deficit, and the pain could get worse.

The White House is considering capping Medicaid spending and withholding federal funds from sanctuary cities that refuse to enforce Trump’s new immigration policies.

That could adversely affect California, because the state depends on Washington for Medicaid matching dollars. State law enforcement also depends on federal funding.

In November, the new president lost the popular vote in California by a nearly 2-to-1 margin and, according to Fienup, Trump might want to “stick it” to California.

This article was edited April 13, 2017, at 10:20 a.m. to correct the misspelling of Matthew Fienup's name.

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