Business Update with Mark Lacter

New California Legislature; Jack Kyser

KPCC business analyst Mark Lacter talks about Calironia's new legislature; he also talks about the the death of LA's economic guru -- Jack Kyser.

Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. So yesterday, the new state legislators took their oath of office - and I suppose that's when the swearing really began.

Mark Lacter: Yeah, Steve, the governor called them into an emergency session before they could put their hands down. They’ll be dealing with the budget deficit, as usual, so we’ll be hearing more doomsday stories about the state being on the verge of falling into the ocean - again. But there's a new report that puts things in a little perspective. It shows how in 2009 - not exactly a great year - California had an economic output of $1.9 trillion (this is value of all the good and services produced). That's the largest output of any state, by a wide margin, and it's almost as large as the output for New York and Texas combined (two states, by the way, where a lot of the California doomsday scenarios tend to originate).

Julian: California’s economy has long ranked in the top ten among countries in the world – where is it now?

Lacter: It's in 8th place, ahead of Brazil and right behind Italy if it were its own country. And the Southern California economy is huge as well - economic output last year was almost $900 billion, which would place it between Mexico and Korea (all the rankings come from the Center for the Continuing Study of the California Economy). What's perhaps most notable is that between 2000 and 2009, California grew more than the national average and only slightly below the rate for Texas. Of course, a lot of that growth happened before the recession, and the big question is whether things will hold up once the recovery takes hold.

Julian: So if California is so powerful, why does it get a bum rap as a place to do business?

Lacter: Well, it's because the state doesn't make it easy for business owners. CNBC ranked California next to last when it comes to business friendliness and second to last for the cost of doing business. And these sorts of rankings have become routine. The regulatory environment is very tough, and California typically ranks near the top in business taxes. But you know there's another side of the story - that same CNBC survey ranked California tops in the nation for both technology and innovation and also access to capital - and it was pretty high up for quality of life and transportation. A place like Alabama may be friendlier to business, but California is where much of the nation's business actually happens, which helps explain why the state has the world's eighth-largest economy.

Julian: But what about high unemployment and the state budget problems?

Lacter: No argument - California has fared worse than other parts of the country when it comes to job losses and high levels of debt - and that's going to be the case for at least another two or three years. But the state has such a huge advantage because of its size that the problems are considered more manageable than they otherwise would be. Actually, the latest UCLA Anderson Forecast, just out this morning, is relatively bullish – much of that the result of trade activity, technology, manufacturing, and health care. Even the housing market is improving. Look, this isn't about sugar-coating a very difficult time - it's only to point out that for all the troubles, this remains an extremely vibrant place to do business.

Julian: Mark, we learned yesterday of the death of Jack Kyser -- a man who knew Southern California's economy inside and out.

Lacter: Jack was truly the dean of the Southern California economists, the guy who reporters could reach most any time of the day or night (weekends and holidays too) to comment on Hollywood, the local ports, the aerospace business - really any aspect of the local economy. And media organizations would always seek him out because he didn't speak in jargon. He was very good at making complicated subjects accessible to the general public. And he was really a pleasure to deal with.

Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes business blogs at LA Observed.com and at kpcc.org.


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