Comerica Bank’s California Economic Activity Index increased in December to a level of 107.5. December’s reading is 19 percent above the historical low of 90.4 set in June 2020. The index averaged 105.8 points in 2020, 18.6 points below the average for all of 2019. November’s index reading was revised to 104.5.
Our California Economic Activity Index improved again in December, up for the sixth consecutive month. Seven out of eight index components were positive for the month including nonfarm employment, unemployment insurance claims (inverted), housing starts, house prices, industrial electricity demand, state total trade and the Dow Jones Technology Index. Hotel occupancy fell in December. We expect our California Index data to show some volatility over the coming months. Our December California Index does not fully capture the slowdown in nonfarm payrolls for the month due to our smoothing process. Also, some of the improvement in California unemployment claims in December may be due to timing issues with fiscal stimulus at the end of 2020. It is also important to note that the California economy, measured by gross domestic product (GDP), is recovering much faster than the state’s labor market. State GDP is highly correlated with aggregate income. Normally, job growth is the driving force behind income growth. However, federal fiscal stimulus continues to supplement lost wages and stabilize disrupted businesses, even as the state faces a sluggish labor market recovery. Earlier this week, California also passed its own stimulus package which includes $600 direct payments to lower income workers and expanded grants to small businesses within the state.
