The COVID-19 recession that began in March brought an end to the longest economic expansion in state history. Now that the expansion is over, we examine how the state's economy developed from 2007 to early 2020 and how its experience differed from the rest of the country.
The first chart shows the number of jobs in 10 broad sectors in the state at the end of the last economic expansion in July 2007 and in February 2020. The largest absolute increases over this period were in the education/health and leisure/hospitality sectors, followed by professional and technical services (including business management), transportation/warehousing/public works, custodial, repairs, personal services and other services, including non-profit organizations. Total employment in the state's manufacturing, wholesale/retail and finance sectors declined during this period.
The following chart compares California's sectors to those in the rest of the country from July 2007 to February 2020. The distance from the diagonal indicates the difference between the sector's growth rate in the state and the rest of the country. Overall, California employment grew 13.5% over the cycle, slightly outpacing the 12.8% growth rate in the rest of the country. The state's Information, Health/Education, Leisure/Hospitality, and Transportation/Warehousing/Utilities sectors grew at a significantly faster pace than the same sectors in other states, while the Manufacturing and Financial sectors performed significantly worse. The most striking result was the Information sector, which grew rapidly in California but declined more than any other sector in the rest of the country.
The next two charts follow the same format as the first two, breaking down the information sector into subsectors for a more detailed analysis. Although the information sector represents a fairly small percentage of employment in California, it is very important because it pays very high salaries (average salary in 2019 was $191,000, compared to an all-sector average of $66,000) and produces services that can be sold worldwide. California's software and data processing employment more than doubled between July 2007 and February 2020, while “other information” employment (mainly online publishing and web search portals) more than quadrupled. In contrast, the state's communications and publishing sector shrank significantly.
The final chart compares California's information subsector job growth to that of other states. California's three most dynamic subsectors grew less than other states. Conversely, the publishing and communications subsector did not decline as sharply as in other parts of the country. High-growth subsectors were already over-represented in California in 2007, but continued to outpace the same subsectors in other states for over 12 years, driving strong growth in the state's overall information sector.
California experienced relatively strong job growth from 2007 through early 2020, driven in part by the phenomenal growth of the emerging information subsector. The state's fate in the next cycle will depend on whether these industries can maintain their rapid growth in the state amid an expected long-term shift to remote work.
