California should be able to advance more in line with national trends

California has a huge and diverse economy that currently accounts for just over 1/8 of total U. S. GDP. Annual state GDP data show that California has tended to grow moderately faster than the national economy. From 1998 to 2008, California’s economy grew 0.5 percent faster than the nation on average, continuing the same sort of outperformance that was typical in the prior 35 years.

In the last few years, however, the bursting of California’s outsized housing bubble has caused the state to uncharacteristically lag national trends. In 2007 and 2008, real GDP in the state trailed the nation by 0.3 and 0.5 percentage points, respectively. Judging from labor market reports and other data, California almost certainly lagged national growth again in 2009. This year, however, California should be able to advance more in line with national trends, now that its housing sector has begun to recover.

Regards,
Dana Johnson

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