Download State Board of Equalization A Review of the Economy: Fiscal Year 2013-14

State Board of Equalization
Discussion of Recent Economic Developments
Publication 329
A Review of the Economy: Fiscal Year
2013-14
Volume XX, Number 4
December 2014
Chart 1
Growth in Real GDP (Fiscal Years 2004-05 Through 2013-14)
4.0%
3.4%
3.1%
National Economy
3.0%
2.5%
2.3%
This edition of the Economic Perspective reviews
important economic developments that occurred in fiscal
year 2013-14.
1.9%
2.0%
2.0%
2.0%
2011-12
2012-13
1.5%
1.0%
0.2%
0.0%
• The U.S. economy in 2013-14 was characterized by
stronger than average economic growth, very low
interest rates, increasing employment, and declining
unemployment rates.
-1.0%
-2.0%
-3.0%
• Unemployment rates for both the U.S. and California
have not been as low as they are now since the most
recent recession ended.
• By many important measures, the California economy
outpaced national growth in fiscal year 2013-14.
-2.6%
2004-05
2005-06
2006-07
Real gross domestic product (GDP) – the broadest measure
of the nation’s output of goods and services – rose 2.5
percent in fiscal year 2013-14. As shown in Chart 1, this
growth was the fastest since the recession started.
2009-10
2010-11
2013-14
Federal Government
-5.2%
State and Local Government
0.9%
Personal Consumption
Expenditures
2.4%
Real GDP
2.5%
In fiscal year 2013-14, real U.S. GDP grew 2.5 percent,
well above its ten-year average growth rate of 1.6 percent.
With the improving economy, employment increased and
the unemployment rate declined.
Gross Domestic Product
2008-09
Chart 2
2013-14 Growth in Real GDP and Major Components
• California construction activity, home prices, and car
sales increased, while consumer price inflation was
below its long-term average.
The unemployment rate declined from 7.8 percent in
fiscal year 2012-13 to 6.8 percent in 2013-14. However,
this rate is high when viewed over a longer time period. In
fiscal year 2006-07, the last fiscal year before the recession
started, the unemployment rate averaged 4.5 percent.
2007-08
Imports
2.7%
Exports
3.7%
5.1%
Fixed Investment
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Real GDP by Sector
As shown in Chart 2, real fixed investment spending led
economic growth, increasing 5.1 percent. Real personal
consumption expenditures, which accounted for 68
percent of GDP, rose 2.4 percent, very close to overall real
GDP. Federal government spending declined 5.2 percent,
while state and local government spending increased 0.9
percent.
Corporate Profits
U.S. corporate profits before taxes were up 1.2 percent in
2013-14. This was the fifth consecutive year of increasing
profits, which are at record levels.
Board Members
Betty T. Yee
First District
San Francisco
Sen. George Runner (Ret.)
Second District
Lancaster
Michelle Steel
Third District
Orange County
Jerome E. Horton
Fourth District
Los Angeles
John Chiang
State Controller
Cynthia Bridges
Executive Director
ECONOMIC PERSPECTIVE: DECEMBER 2014
Volume XX Number 4
Nonagricultural Employment
California personal income increased 3.6 percent, above
U.S. income growth of 2.7 percent.
With the growth in overall real GDP and corporate profits,
nonagricultural employment rose 1.7 percent. This was
the fastest growth since fiscal year 2005-06.
With the strong growth in jobs, the California
unemployment rate declined from 9.7 percent in 2012-13
to 8.3 percent in 2013-14. However, the rate remains well
above the 5.0 percent rate in fiscal year 2006-07, the last
year prior to the start of the Great Recession.
Interest Rates
The U.S. Federal Reserve Board (Fed) maintained extremely
low interest rates in 2013-14, essentially continuing its
monetary policy instituted during the recession. The Fed
kept the federal funds rate within a target range of zero to
0.25 percent. Three-month U.S. Treasury bill rates averaged
0.04 percent in fiscal year 2013-14, while ten-year U.S.
Treasury bond yields averaged 2.71 percent. Short-term
interest rates were near historic lows.
Employment
California nonagricultural employment strengthened
2.6 percent in fiscal year 2013-14, as payrolls rose by
389,000 jobs. Despite the growth, there were 74,000 fewer
nonagricultural jobs in 2013-14 compared to the peak
reached in fiscal year 2007-08.
Consumer Prices
Chart 4
Growth in California and U.S. Nonagricultural Employment
Fiscal Years 2004-05 Through 2013-14
The U.S. consumer price index rose 1.6 percent in 201314, below the ten-year average of 2.4 percent.
CA
U.S.
4.0%
3.0%
Housing Starts
2.0%
1.0%
Close to a million housing units were started in 2013-14,
the highest number since the recession started.
0.0%
-1.0%
Federal Budget Deficit
-2.0%
-3.0%
As the economy expanded and incomes increased, the
federal budget deficit improved, from $680 billion in 201213 to $483 billion in 2013-14.
-4.0%
-5.0%
California Economy
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
The education and health services sector led the gains
in jobs in 2013-14, as shown in Chart 5. Other sectors
with strong job gains included professional and business
services, trade, transportation and utilities, and leisure and
hospitality.
As shown in Chart 3, both U.S. and California real GDP
have been increasing close to 2.5 percent in recent quarters.
However, by some important measures, the California
economy outpaced national growth in fiscal year 2013-14.
California nonagricultural employment rose 2.6 percent,
faster than the 1.7 percent U.S. increase. (See Chart 4.)
Chart 5
2013-14 Employment Changes by Major California Industry
(Thousands of Jobs)
Manufacturing
Chart 3
U.S. and California Real GDP Growth
(Real GDP for Each Quarter Compared to Four Quarters Prior)
Mining and Logging
6.0%
Financial Activities
Government
-1
0
0
9
4.0%
Other Services
2.0%
Information
Construction
0.0%
Leisure & Hospitality
-2.0%
Trade, Transportation & Utilities
10
17
40
56
63
Professional & Business Services
-4.0%
92
Educational & Health Services
103
Thousands of Jobs
-6.0%
-8.0%
US
CA
2
ECONOMIC PERSPECTIVE: DECEMBER 2014
Volume XX Number 4
Building Construction and Home Prices
2.5
As shown in Chart 6, the value of all private building
construction permits issued in California rose by 27.6
percent in fiscal year 2013-14, matching the strong growth
of the prior year. Nonresidential construction led the
construction boom, increasing 44 percent. Residential
construction rose 15 percent. Even with the gains, total
construction permit values are still only about 70 percent
of their 2005-06 peak levels.
2.0
1.8
1.5
1.3
1.2
10.5%
9.9%
1.1
2008-09
2009-10
0.5
0.0
2004-05
2005-06
2006-07
2007-08
2010-11
2011-12
2012-13
2013-14
Consumer Prices
As shown in Chart 8, California consumer prices for all
urban consumers rose 1.4 percent in 2013-14, down from
a 2.1 percent increase in 2012-13. California consumer
prices rose more modestly than did those of the nation as
a whole. At the national level, the consumer price index
increased by 1.6 percent in 2013-14.
27.6%
20.0%
10.0%
1.1
1.0
Chart 6
California Building Construction Permits
(Annual Percent Change, by Fiscal Year)
27.6%
1.7
1.6
1.6
About 82,000 home building permits were issued in 201314, up from 74,000 in 2012-13. Permits for both multifamily
units and single family increased. Median home prices
rose 19 percent in fiscal year 2013-14, nearly matching the
rapid growth of the prior year. Despite the increases in
home prices, they stood at only 76 percent of their 200607 peak.
30.0%
1.8
1.7
Store building and parking structures led the increases in
nonresidential construction, as each rose over 100 percent.
40.0%
Chart 7
California New Vehicle Registrations by Fiscal Year
(Millions of Cars and Light Trucks)
7.9%
3.5%
Chart 8
Changes in California and U.S. Consumer Prices
0.0%
4.5%
-10.0%
4.0%
-17.0%
-20.0%
-15.3%
-17.3%
3.5%
3.0%
-30.0%
2.5%
-37.4%
-40.0%
2.0%
-50.0%
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
1.5%
1.0%
Vehicle Registrations
0.5%
California new car and truck registrations rose 6.6 percent
in fiscal year 2013-14, to 1.7 million cars and light trucks.
(See Chart 7.) Car and truck sales matched the 1.7 million
units sold in fiscal year 2006-07, the year before the Great
Recession started.
0.0%
2004-05
2005-06
2006-07
2007-08
2008-09
CA
3
2009-10
US
2010-11
2011-12
2012-13
2013-14
ECONOMIC PERSPECTIVE: DECEMBER 2014
Volume XX Number 4
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For more information about topics covered in this
publication and previous issues, please visit any of the
websites listed below.
Joe Fitz, Chief Economist, MIC:67
State Board of Equalization
PO Box 942879
Sacramento, CA 94279-0067
1-916-323-3802
[email protected]
California Department of Finance
www.dof.ca.gov
California Employment Development Department (EDD),
Labor Market Conditions in California
www.labormarketinfo.edd.ca.gov
Federal Reserve Bank of Philadelphia, Survey of
Professional Forecasters
www.phil.frb.org/research-and-data/real-time-center/
survey-of-professional-forecasters/
Current and past issues of this publication are on our
website: www.boe.ca.gov/news/epcont.htm
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1-888-324-2798
National Association for Business Economists
www.nabe.com
To contact your Board Member, see
www.boe.ca.gov/members/board.htm
U.S. Bureau of Economic Analysis
www.bea.gov
U.S. Bureau of Labor Statistics
www.bls.gov/cpi
U.S. Census Bureau
www.census.gov
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