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Another CA manufacturer gone, but we fail to acknowledge the problem

Posted by Gino DiCaro, VP, Communications on Feb. 23, 2011

Yesterday the Inland Daily Bulletin wrote about a California-based hydrogen-powered fuel cell company, Bing Energy, deciding to locate its manufacturing, along with a headquarters and a technology lab, in Tallahassee, Florida.

Bing officials indicated clearly that it was 15 percent cheaper to operate in Florida and that the Sunshine state unequivocally wanted them there.

In the same article, Chris Thornberg of Beacon economics countered, "we've lost a lot of manufacturing jobs, but a lot less than in other states.  California (manufacturing) is weathering the storm better than the nation overall."

The Public Policy Institute of California similarly countered that, "only a small fraction of the state's job losses are due to businesses leaving the state."

Brad Kemp, also of Beacon Economics, indicated that any statements about California's negative business climate become a self-fulfilling prophecy.

What?  These are highly respected economists and institutions, but we can't just will this problem away.

I offer the following retort:

To Thornberg's "CA losing less" remark: California lost 37 percent of it's manufacturing base since 1990 while the country lost 34 percent.  This period included the high technology boom in California so we are really losing ground in traditional manufacturing employment. But more important - look at recent manufacturing investment and facility growth compared to other states.  This tells us our future.  It's not good.  Since 2007, California is among the worst in investment dollars and new facilities.

New manufacturing investment has come in at only $235 per person in California but a whopping $1,335 per person nationally.  chart

New and expanded manufacturing facilities have been built or expanded at only 3.7 facilities per million people in California compared to 28.7 per million nationally.  chart

This tells us all we need to know about the climate for manufacturing in California.  We are near the bottom in new manufacturing growth.

To PPIC's "fraction of job losses due to leaving" remark: California businesses actually picking up and moving entire operations to other states has always been just a part of the equation. The important question is who is expanding in the state?  It's the lack of new growth that is the most troubling.

To Kemp's "self-fulfilling prophecy" remark: If mere words repeated again and again could improve the business climate for California manufacturing, this blog would be shouting to the rooftops.  Sadly, investors actually run the numbers prior to putting millions of dollars at risk.  I don't think Bing Energy, the subject of the article, looked to comments made in the news about California's business climate to make their decision.

This raises a troubling question: If we can’t count on economists to avoid magical thinking, how can we expect legislators to govern with a higher standard?





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