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State Economic Growth Expected to Outstrip Rest of U.S. Through 2000

July 30, 1986|NANCY YOSHIHARA | Times Staff Writer

California's economy is expected to post healthy gains through the year 2000, growing at a faster rate than the nation as a whole, and much of that growth will be concentrated in Southern California, according to a new report by Wells Fargo Bank.

By the turn of the century, the total production of goods and services in California is expected to increase to an estimated $820 billion. If California were a separate country, it would rank fifth, behind the United States, the Soviet Union, Japan and West Germany.

The bank's report, "California 2000: A Business and Economic Appraisal," cautioned that the state's economy will grow at a slower rate than in the past and will face new challenges in protecting its traditional manufacturing strengths in high technology and aerospace from intensified domestic and foreign competition.

More Congestion, Pollution

The state's projected business growth--from a total output of $485 billion in 1985--will also be accompanied by massive population growth that will create increasingly frustrating problems, including more congestion and pollution. A $78-billion investment will be required in California highways, schools, water and sewer facilities and other public services, the report said.

In short, California will have to be more aggressive in selling, marketing and managing its growth, according to Joseph Wahed, chief economist and senior vice president of San Francisco-based Wells Fargo.

"The days of sitting back and letting growth come is over," he explained in an interview. "In the old days, you could say, 'If it ain't broke, don't fix it.' Now, if you don't fix it, it will break."

Southern California, which by itself would rank as the 10th-largest economy in the world, is expected to increase its dominance in every key measure.

With 60% of the state's population and employment, the area is expected to see 4 million new jobs and 2 million new homes. Statewide, the population is expected to rise to 33 million by 2000, up 7% from 1985.

Aging Population

That translates to an annual growth rate of 1.6%, which is twice as fast as the population growth for the entire country.

The population growth will be accompanied by dramatic demographic changes that will have a significant impact on the state's economic development. The bank said that more than one-third of the population will be over 50 years old, compared to only 20% today.

Ethnic minorities, mostly Latino, will make up 45% to 47% of the population, compared to the current 37%.

Emigration from Mexico and Asian countries also is expected to continue.

Wahed said the state's economic foundation will continue to be in its traditional industrial complex of defense, aerospace, electronics, agriculture and construction, but service industries will see the fastest growth.

In addition, he said, the changes in population will mean more opportunities in tourism, leisure and retirement-related businesses.

California's strategic position to the Pacific Rim will mean continued economic expansion across the Pacific, he said.

The report said international business and foreign investment in the year 2000 will account for about 25% of California business, up from today's 17%.

WORLD ECONOMIES IN 2000

(GNP in billions of 1985 U.S. dollars)

Rank Forecast 1985 2000 1975 1985 2000 1 1 United States $3,011 $3,989 $6,220 2 2 USSR 1,603 2,013 3,046 3 3 Japan 821 1,301 2,448 4 4 W. Germany 498 623 971 6 5 California 323 485 820 5 5 France 412 510 820 9 7 China 165 297 712 7 8 Britain 382 453 675 8 9 Italy 283 354 552

Source: World Bank; Central Intelligence Agency; forecast by economics division, Well Fargo Bank.

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