Home Construction

A new report from Beacon Economics and City National Bank points to a comeback in the Inland Empire. Above, homes being built in Rancho Cucamonga. (Gina Ferazzi / Los Angeles Times)

Economic comeback in the Inland Empire helps drive California recovery, report says
September 15, 2014

The economic recovery in California struggled through the first half of the year but now is picking up speed, driven by improvements in the real estate and the job markets, according to a quarterly report from Beacon Economics and City National Bank.

The state’s economic output swelled at an estimated 4% annual rate in the second quarter, a sharp turnaround from the first quarter’s dismal minus-2.5% rate.

Researchers pegged California’s total gross state product — the value of all goods and services produced in the state — at $2.1 trillion, or 13.1% of the overall U.S. economy. That would make it the 10th-largest economy worldwide.

The real estate industry was a major factor in the reversal. On the commercial side, growing companies were hunting for more space. On the residential side, prices continued to rise as existing home sales in California increased 6.9% in the second quarter from the first quarter, according to the report. Prices now are rising more slowly, and volume remains lower than last year.

Even so, economists warned that California’s still high cost of living could affect employment down the line.

“Businesses will be hard-pressed to recruit mid-skilled workers in a state where the median price of a house is well over twice the national average,” said Beacon founding partner Christopher Thornberg.

California accounted for 14.2% of the nation’s net employment increase in the second quarter, with businesses adding 109,800 positions to payrolls. The state was second only to Texas, which saw a surge of 126,200 jobs, and vastly outpaced Florida, where 63,400 new jobs were added.

About 70% of payroll expansion in California stemmed from three sectors: the education and healthcare segment, the professional and business area, and the leisure and hospitality sector, according to researchers.

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