Markets

The True Story Of How California Came Back From The Brink And Started Kicking Ass Again

Rob Wile

2013-01-16T21:59:00Z

Arnold Schwarzenegger

Last week, California Gov. Jerry Brown announced that for the first time in years, the state was projected to run a surplus starting next fiscal year.

Advertisement

Given what the state went through during the recession, few could have predicted this (although Bill McBride did).

So how'd they do it?

We dug in.

Advertisement

It's 2008. Cities are declaring bankruptcy.

california

Unions are demanding a recall vote on Gov. Schwarzenegger.

california

Advertisement

The state breaks its own record for failing to enact a budget.

california USE

Meanwhile in the economy, payrolls are collapsing (Cali's in blue).

california

Advertisement

The housing market is getting obliterated.

california

As has its Conference Board coincident index, which measures cyclical data.

california

Advertisement

Finally, the state is forced to issue actual IOUs.

california iou

And some were even predicting the state could break up.

escape from la los angeles california

(Here's who was saying that.)

Advertisement

Well, that was then...

arnold schwarzenegger phil hartman jingle christmas

This is now.

arnold

Advertisement

Payrolls have recovered.

california

Home prices are now on the RISE!

california

Advertisement

Their leading index is booming.

california

As is its coincident index.

california

Advertisement

So what turned it around?

san francisco giants 2012 nlcs celebration barry zito

According to Richard Green, chair of USC's Lusk Center for Real Estate, the answer's pretty simple...

silicon valley

Advertisement

Here's YOY state employment growth in five different sectors, with TECHNOLOGY in blue. Case closed. Domestic industry is booming.

california it employment

Here's the local view. Silicon Valley tech is BOOMING.

california

Advertisement

San Francisco's foreclosure rate is now one of the lowest in the nation — 1 out of every 2,420 units, compared with 1 out of every 728 nationally.

San Francisco

It's sort of hard to stay down for long with these guys around.

page bezos zuckerberg

Advertisement

And when your bread-and-butter industry improves, employment for everyone goes up — here's San Francisco's labor force rate.

california

Orange County has also helped the state recover — here's its unemployment rate.

california

Advertisement

Orange County hosts the regional headquarters for most Asian automakers, most of whom have seen phenomenal turnarounds.

auto sales

And as mentioned earlier, people wanna buy houses again — even in SoCal, where prospects recently bid up the price of a 1,500 sq ft. home 10 percent.

southern california housing auction

(Here's our full story on how that went down.)

Advertisement

The last key to the turnaround has been the popularity of Gov. Jerry Brown and his Sacramento reunion tour (he was also governor in the '70s).

jerry brown

In his first budget, he cut spending by $12.5 billion.

jerry brown

Advertisement

This year, he proposed $8.5 billion in tax increases — a seemingly impossible task in a state where most taxes must be voted on by referendum.

jerry brown

But two months ago, after aggressive, if late, campaigning from Brown, voters approved Prop 30, which will raise $6 billion via a $0.25-cent sales tax hike and a new marginal income rate.

california prop 30

Advertisement

And thanks to Prop 30, Gov. Brown could make his historic budget surplus announcement.

jerry brown

And for the first time in ages, the state has a Democratic supermajority...

donkey democrat

Advertisement

Which many say will bring an end to the state's political gridlock.

sacramento capitol

That's California's story. For the rest of the country, check out...

october 2011 state coincident index 4x3

The Ultimate Visual Guide To America's Boom, Bust And Rebound >

California

Advertisement

Jump to

Main content
Search
Account