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California beats UK to become No. 5 economy

AP, SACRAMENTO, California

Waves crash against a sea wall in San Francisco Bay beneath the Golden Gate Bridge California on Dec. 16, 2014.

Photo: Reuters

California’s economy has surpassed that of the UK to become the world’s fifth largest, according to new federal data made public on Friday.

California’s GDP rose by US$127 billion from 2016 to last year, surpassing US$2.7 trillion, the data showed.

Meanwhile, the UK’s economic output shrunk slightly over that time when measured in US dollars, due in part to exchange-rate fluctuations.

The data demonstrate the sheer immensity of California’s economy, home to nearly 40 million people, a thriving technology sector in Silicon Valley, the world’s entertainment capital in Hollywood and the nation’s salad bowl in the Central Valley agricultural heartland.

It also reflects a substantial turnaround since the Great Recession.

“We have the entrepreneurial spirit in the state, and that attracts a lot of talent and money,” said Sung Won Sohn, an economics professor at California State University Channel Islands. “And that’s why, despite high taxes and cumbersome government regulations, more people are coming into the state to join the parade.”

All economic sectors except agriculture contributed to California’s higher GDP, California Department of Finance chief economist Irena Asmundson said.

Financial services and real estate led the pack at US$26 billion in growth, followed by the information sector, which includes many technology companies, at US$20 billion. Manufacturing was up US$10 billion.

California last had the world’s fifth-largest economy in 2002, but fell as low as 10th in 2012 following the Great Recession.

Since then, the largest US state has added 2 million jobs and grown its GDP by US$700 billion.

California’s economic output is now surpassed only by the total GDP of the US, China, Japan and Germany.

The state has 12 percent of the US population, but contributed 16 percent of the country’s job growth between 2012 and last year.

Its share of the national economy also grew from 12.8 percent to 14.2 percent over the period, state economists said.

California’s strong economic performance relative to other industrialized economies is driven by worker productivity, said Lee Ohanian, an economics professor at University of California, Los Angeles, and director of UCLA’s Ettinger Family Program in Macroeconomic Research.

The UK has 25 million more people than California, but now has a smaller GDP, he said.

California’s economic juggernaut is concentrated in coastal metropolises around San Francisco, San Jose, Los Angeles and San Diego.

“The non-coastal areas of CA [California] have not generated nearly as much economic growth as the coastal areas,” Ohanian wrote in an e-mail.

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