Overview 2011 State of the State Conference

Institutional Context & Strategic Advocacy

• The California Center, now headed by Kevin Clowden, has been institutionalized to analyze the state economy and drive policy implementation.
• The Center has successfully advocated for the creation of a strategic economic development plan, a first for California in 25 years, led by Lieutenant Governor Gavin Newsom.
• Advisory Council Chair Scott Minard (Guggenheim partner) leads efforts to influence state economic policy changes.
• The Center is developing a strategic "blueprint" for California's future in response to recession-era inquiries, including housing equity studies.

Economic Recovery & Job Growth Trends

• California experienced a deeper contraction during the Great Recession, with job losses of 7.2% from peak versus the national average of 5.3%.
• California created 250,000 private sector jobs over the past 12 months, outpacing national growth trends.
• Professional and business services (management consulting, engineering, IT) drive recovery, with wages averaging 30% above the statewide mean.
• Manufacturing employment has halted its decline and increased slightly, reversing a trend of "hemorrhaging" jobs.
• Construction activity, which lost over 300,000 jobs and bottomed out in late 2009, is rising due to public investment in highways and infrastructure.
• Silicon Valley/San Jose is among the top five U.S. metros for job growth, driven by information/communications equipment and social media sectors.

Corporate Investment & Technology Spending

• Business investment in IT equipment rebounded dramatically in the early recovery stage as corporations sought to enhance productivity and protect market share.
• Current growth in IT investment remains double-digit, though the pace has slightly moderated from initial peaks.
• California remains a net exporter of information, technology, and software, with significant recoveries in San Francisco, Orange County, and San Diego post-contraction.

International Trade & Export Dynamics

• California exports nearly 35% of its total goods to Asia, with shipments to China rising over 30% in the past year.
• 13% of total California exports go to China or Hong Kong combined, primarily involving IT equipment, aircraft, aerospace, and agricultural products.
• The state faces limited exposure to Chinese economic slowdowns as it does not sell industrial commodities (e.g., copper) to China, only agricultural goods.
• Port activity supports thousands of manufacturing, transportation, and wholesale jobs, with year-over-year trade gains of approximately 16%.
• High-tech product exports (shipped via air) are excluded from current port statistics but represent a growing component of trade.

Venture Capital & Emerging Industries

• Silicon Valley accounted for 45% of all U.S. venture capital investments in 2010; California as a whole captured 57% of national placements.
• The state maintains leadership in nanotechnology, clean technology, green technology, and alternative energy sectors.
• A recent study, California's Position in Technology and Science, ranks California fourth nationally in composite indicators adjusted for per capita.
• Key rankings from the study include:
  • 4th place overall in technology/science metrics.
  • Slipped to 4th in R&D investment and 4th in risk capital.
  • 13th in human capital composite, identified as the weakest performance area.
  • Maintains top 10 status in technology concentration and dynamicism (new firm creation).

Biomedical Industry & Higher Education

• The U.S. biomedical industry, led by California, has surpassed Europe in dominance since the mid-1980s.
• California holds four of the top 12 global universities in life sciences and medicine (Stanford, Berkeley, UCLA, UC San Diego), with UC San Francisco recently rising to 13th.
• The Center's report recommends five policy actions:
  • Make the R&D tax incentive permanent.
  • Reduce the U.S. corporate income tax rate for international competitiveness.
  • Adequately fund the FDA and NIH.
  • Leverage U.S. strengths in medical devices.
  • Promote the commercialization of biomedical research at universities.

Migration Patterns & Human Capital

• A study titled What Brain Drain? reveals California retains bachelor's degree-educated natives better than any other state, with out-migration rates half the national average.
• California retains foreign-born skilled talent at the lowest outflow rate in the nation, successfully filling gaps left by slower in-migration of out-of-state graduates.
• The absolute number of foreign-born engineering degree holders in California exceeds that of native-born Americans.

Future Outlook & Risks

• California is projected to grow slightly faster than the U.S. average and the U.K. over the next few years, though unemployment will not return to 2006–2007 levels for years.
• Domestic headwinds include a stagnant housing market and weak consumer confidence; foreclosure rates are declining to match national averages.
• The primary downside risk to the global outlook is the Eurozone sovereign debt and banking crisis, rather than domestic factors.
• Productivity growth in California may negatively impact near-term job numbers but is expected to enhance long-term global competitiveness.
• The housing market is anticipated to stabilize by mid-2012, though shadow inventory remains above absorbed levels.

Steve Jobs Tribute

• The conference featured a tribute to Steve Jobs, highlighting his unique ability to combine engineering with artistry and his role as a self-directed chief marketing officer.
• A video tribute included Jobs' famous 2005 Stanford commencement address quotes emphasizing trusting one's inner voice, connecting dots backward, and the necessity of loving one's work to persevere.
• Key quotes emphasized: "Stay hungry, stay foolish," and "Don't waste time living someone else's life."