Remember the obituaries? California, killed by high taxes, heavy regulations, half-million-dollar mortgages and three-hour commutes-and would the last person to move to Boise please turn off the lights? But a funny thing happened on the way to the graveyard. As the U. S. economy slows, California’s is gaining speed. Last year it produced 300,000 jobs, one out of every six new positions nationwide. This year it may repeat that feat. Unemployment is still high, but the agonizing shift from an economy based on defense and real estate is almost over. Leading-edge civilian industries, from biotech to entertainment and computer software, have given the state a far sounder footing. It isn’t the go-go ’80s, says Stephen Trafton, CEO of Glendale Federal Bank–“just steady, real positive growth.”
That’s far more than most Californians were looking for two years ago. From 1990 to 1994, the state lost 350,000 jobs in manufacturing and an additional 200,000 in construction. Fires, earthquakes, a drought and a race riot deepened the sense of gloom. California had voted for Republican presidential candidates six times running, but its despair helped move 54 critical electoral votes to Bill Clinton’s column in 1992. The state’s economic revival gives him a solid shot at holding those votes this fall-and with them, holding on to the White House.
The rebound is most evident in the techno-world of northern California. Ignore Intel’s sagging stock price and Apple Computer’s implosion. The personal-computer boom plays to Silicon Valley’s strength, and some of the biggest winners make things you may never have heard of. Like hubs and routers, the gadgets that run computer networks. Most of the industry is based near San Jose; Cisco Systems alone doubled its California job count last year to 4,100. Up the road in Milpitas, C-Cube Microsystems, which designs chips that compress video signals, went from 140 employees a year ago to 280 now, and is adding workers so fast that founder Alexandre Balkanski can’t recognize all the faces. “I walk the halls and people ask me what I do,” says Balkanski, who started C-Cube in 1988. “I don’t know how to tell them I run the place, so I say, ‘Hello, how are you?”’
No doubt about it, some folks have fled. But headlines can be deceiving. Utah’s much-ballyhooed “Software Valley,” peopled with California refugees, boasts 35,000 technical jobs. That’s huge, from Utah’s perspective - but pea-size by California’s scale. High-tech companies between San Francisco and San Jose added that many jobs between 1992 and 1995. Silicon Valley still crawls with job shops that turn out custom chips and circuit boards overnight. After putting a big chip plant in New Mexico in 1991, even Intel has come home. Two of its latest plant expansions have been in Silicon Valley, and a third was nearby.
Southern California has been slower to turn up. The fiscal woes of Los Angeles and Orange County make the mood less optimistic. Clinton’s decision last week not to buy more $800 million B-2 bombers, which would have been built near Los Angeles, dealt a serious blow to the ailing defense industry. But the region’s twin engines, foreign trade and entertainment, are going full blast. The adjoining ports of L.A. and Long Beach can barely keep up with demand. American President Lines is doubling its capacity, and Korea’s Hanjin Shipping Co. is tripling its space. Business is so strong that last year the longshore union added 400 new $80,000-a-year dockworkers, the biggest increase in a decade. The surge in movies and TV has, by some counts, meant 85,000 new jobs. Under production by Steven Spielberg, David Geffen and Jeffrey Katzenberg: the first new Hollywood studio in 50 years. “I had a number of friends who left the state,” says Eddie Ackerman, who runs a TV editing company in Burbank. “Now they are calling to say, ‘Look out for a job for me; 1 want to move back’.”
The painful part isn’t over. Aerospace, which has shed 200,000 workers since 1989, is still shrinking. Office construction is dead after a decade of overbuilding. Housing remains in the dumps, and 6,000 bank workers will land on the street when San Francisco’s Wells Fargo Bank takes over Los Angeles-based First interstate Bank this spring. “The state’s not quite firing on all cylinders,” says Salomon Brothers economist David Hensley. But if construction picks up, Hensley adds, 1980s growth rates are within reach. That’s no pipe dream. Kaufman & Broad, a big home builder, says its January sales in California were up 35 percent over 1995’s. “People are starting to feel very good about the future,” says president Bruce Karatz. Or at least less bad. A December California Poll found that 62 percent of Californians believe the state is “seriously on the wrong track.” Four years ago, 90 percent felt that way.
Who gets the credit for California’s resurgence? That’s the 54-electoral vote question. Thanks to Ross Perot, Clinton took the state in 1992 with only 46 percent of the vote. Since then he’s practically made the place his second home, visiting 21 times in 37 months. While Californians overwhelmingly profess to hate Washington, half of them rate the president’s performance “good” or “excellent.” The latest San Francisco Examiner poll shows him leading all GOP challengers, including Bob Dole, by 12 points or more.
That leaves Pete Wilson in a vise. The Republican governor, a Dole backer, wants to convince voters that the California comeback isn’t Clinton’s doing. Military-base closings, overzealous environmental regulations, the cost of educating the kids of illegal immigrants–all are hurting the economy, Wilson says, and the president is to blame. “His administration has been distinctly anti-jobs in California,” Wilson told NEWSWEEK. “They’ve got a bell of a lot to answer for.” A Wilson-backed voter initiative to bar state-mandated affirmative-action programs, headed for the November ballot, also serves to attack the president. The ballot measure is popular even among Democrats, but it hasn’t yet hurt Clinton.
Pin-our-troubles-on-the-Democrat will be a tough game for the GOP to win in California. After all, Wilson, who was elected in 1990, was presiding over an economic slide before Clinton took office. The governor’s warnings that taxes and federal regulations are killing jobs aren’t so compelling now that the economy is outperforming the nation. “He’s got a license plate that says CALIFORNIA IS BACK,” gibes a Clinton administration strategist. “It kind of puts him in a tough position.”
After a devastating recession from 1990 to 1994, California has regained 500,000 jobs.
