California Returns as the Seventh Largest Economy in the World

After years of recession, California is gaining growth due to expansion in such sectors as IT and engineering. According to the U.S. Bureau of Economic Analysis, the state’s GDP reached $2.3 trillion in 2014, rivaling other nations such as Brazil.

After years of recession, California is gaining growth due to expansion in such sectors as IT and engineering. According to the U.S. Bureau of Economic Analysis, the state’s GDP reached $2.3 trillion in 2014, rivaling other nations such as Brazil.

Governor Jerry Brown touts California’s diverse economy as reasons for his state’s success. The resurgence has led to the state government issuing a $117 billion spending bill for 2015-16, which is $2 billion higher than Brown’s proposal of $115 billion. Most of the money would go to social programs in the form of welfare, higher education and childcare. Despite California’s thriving economy, the state holds some of the highest poverty levels in the United States. Further, housing costs keep rising, and the drought situation still has consequences for the economy.

The lack of water may drain $2.7 billion from the economy in 2015, while slashing 18,600 jobs. The tech field is a prime factor in California’s growth, but agriculture is another reason why California is undergoing an economic boom, despite the severe drought plaguing the state. The other good news is that California’s agriculture sector only comprises 2.0 percent of the overall economy, and employment on farms has grown at a steady rate in the past decade.

In addition, a report from the University of the Pacific Center for Business and Policy Research notes that the drought will only have a “mild” impact on the economy, according to Capital Public Radio. The drought had a 0.1 percent impact on the economy in 2014, and the drought is expected to have a 0.25 percent effect on the state’s GDP. This assessment is supported by CoBank, which is a cooperative bank comprising of various banks and other lending agencies, releasing a similar report stating that the drought will only have a moderate impact on the economy.

The CoBank report notes that California’s employment levels will fall to 6.0 percent by the end of the year, and many areas in the central part of the state will maintain single-digit levels of unemployment. Cities such as San Francisco have a booming job market, despite the setbacks of high housing costs, and the Bay Area is considered the most thriving area in California, according to the report. San Jose, a city where the tech industry thrives, will undergo a 5.0 percent growth rate throughout 2015. California’s diverse and hot button industries are propelling the economy forward and the state will continue to advance despite weaknesses in the U.S. economy as a whole.