California’s economic indicators increased -- prior to tax bill
December 5, 2017
• Comerica Bank’s Index is 24 percent above Great Recession’s low
• “Uncertainty remains on the individual side of tax reform”
California’s economy continued its upward movement, according to the Comerica Bank California Economic Activity Index, measured prior to approval of the Republican tax bill in the Senate.
The index grew by 0.2 percent in September to 121.2. September’s reading is 23 points, or 24 percent, above the index cyclical low of 97.8. The index averaged 118.6 points in 2016, two and three-tenths points above the average for all of 2015.
August’s index reading was revised down to 120.9.
After an inconsistent spring and summer hiring season, the state posted consecutive monthly job gains in September and October. California job gains have firmed overall in the second half of 2017, adding a net 160,000 jobs from July to October.
Ongoing improvements in the state’s labor market will support the California economy through year end 2017, the bank says.
The September index results were mostly positive, with five out of eight sub-indexes improving for the month. The positives were nonfarm employment, unemployment insurance claims (inverted), house prices, total state trade and the Dow Jones Tech Stock Index.
The two negative factors for the month were industrial electricity
demand and hotel occupancy. Housing starts were unchanged for the month.
“We expect the California economy to grow at a moderate pace as it navigates the uncertainty surrounding tax reform,” says Comerica Bank Chief Edonomist Robert Dye.
“Congressional Republicans hope to have a final tax bill to President Trump by the end of the year. Corporations are expected to benefit from lower tax rates. However, uncertainty remains on the individual side of tax reform and its impact on household spending,” Mr. Dye says.
In particular, he says, the final standing of the mortgage interest deduction, the state and local tax deduction and the alternative minimum tax is unknown. “These issues may be more impactful in high income states like California,” he says.