The California and national economies are recovering at a modest pace. The economic outlook has improved slightly. Labor markets made higher gains in the latter half of 2011, but growth moderated in the early months of 2012 (Fuel Cost went up around 25% during this time). Consumer attitudes and spending and business investment have been improving. Gross Domestic Product (GDP) growth is projected at a higher level for 2012. The risks to recovery are now projected to be much lower. However, real estate conditions and unemployment rates continue to limit growth.
The biggest change in the California outlook stems from incorporating assumptions about the impact of the initial public offering of Facebook stock. It may turn out to be one of the largest initial offerings in U.S. history and far larger than all of the recent offerings in the internet sector. Since the company, its founder, principal employees, and many of its initial investors reside in California, it is projected to have a significant positive impact on California personal income in the latter half of 2012, increasing it by 1.7 percent.
California regions that are home to high‑technology, high‑wage, and/or export‑driven industries are doing relatively well. The remaining areas of the state are still affected by weak housing markets and public sector financial troubles.
California is benefiting from its attractiveness to venture capitalists. In 2011, California accounted for more than half of the entire nation’s venture‑backed investment — for the fourth consecutive year — led by software and biotechnology. A substantial portion of the state’s recent jobs gains stemmed from hiring in high‑wage industries such as computer design, semiconductor manufacturing, information technologies, and scientific and technical research. This focus on high‑technology industries has boosted California incomes. For example, the Facebook IPO could result in about $12 billion of additional income for California residents in the latter half of 2012.