Synopsis

Economic Conditions and Structures

Economic Conditions and Structures

Economic Conditions and Structures (pages 1-17) (839 KB)

California’s economy is now similar in size to those of Italy and France. Like these two nations, the State has a large metropolitan based economy, with smaller regional based economies centered around forest, grazing and agricultural lands. California was growing faster than the nation as a whole in the late 1980s but experienced a much deeper recession from 1990 to 1994 (see figure below). From 1994 to 2000, California was again one of the fastest growing economies in the nation. However, since 2000, the United States has experienced a significant slowdown with few clear indications whether the recovery will be quick or bumpy. At the time of this review, comprehensive economic data for many themes specific to California were not available beyond 2000. It is therefore prudent to consider trend data during the 1990s as possibly an overestimation of patterns to be expected in the early part of the current decade. Most of the structural changes in regional economies noted in the 1990s show little sign of being reversed.

The four economic themes most germane to the forest and rangeland regions of California are the following:

• the overall California economy dominates economic growth rates, employment, and industry-specific growth patterns;
• forest and range products are significant components of regional agricultural economies in some parts of California but small components at a Statewide level;
• the regional economies of areas dominated by forest and rangeland are small compared to the Statewide economy, with proportionally less of the high value industries and employment and proportionally more dependence on commodities and services related to forests and rangelands; and
• as consumers, Californians demand vast amounts of commodities, traditional services such as outdoor recreation, and ecosystem services such as clean water, wildlife habitats, and representative examples of various ecosystems.

Overall California economic trends

During the 1990s, the California economy recovered from a recession and then grew rapidly. The following table summarizes sectoral output and employment for the principle non-farm industries. The gross state product (GSP) grew by more than 30 percent during the decade. It was driven primarily by growth in high-value services, especially financial services, and the manufacturing sector that reduced its workforce but achieved high rates of productivity growth. Sectors that are relatively more important in forest and range regions, agricultural and forestry services, transportation and utilities, and government had low productivity growth and another—manufacturing—lost jobs.

Regional economies

The California Economic Strategy Panel (CESP) divided California into nine separate economic regions that are similar to county-based bioregions. Three of the regions-Northern California, Central Sierra, and the Central Coast-are the primary forest and range regions. The Northern Sacramento Valley is centered on irrigated agriculture but also includes considerable forest and rangeland as well as a large portion of the California's timber mills (see following map).

Based on personal income, the three primary forest and range regions represent around five percent of the overall California economy (see following table). From 1990 to 2000, the most significant change between the regions was the rapid growth of the San Francisco Bay Area in terms of its share of the total State economy as well as in terms of the significant increase in per capita incomes.

Trends in per capita income for each economic region from 1990 to 2000 show that the Bay Area increased its relative economic advantage (see figure below). The rest of the more populous regions are clustered around the Statewide average, while the two agriculturally dominated regions, the San Joaquin Valley and the Northern Sacramento Valley, and the two forest regions, Northern California and the Central Sierra have per capita incomes that are only two-thirds of the State average. Without significant growth in existing sectors and the addition of new higher-wage opportunities, these regional disparities will probably continue.

Regional employment metrics are compared to the Statewide average in the following table. Again, the Bay Area outperformed the State average in all aspects. The Southern Border region that is dominated by San Diego also was above or equal to the State in most aspects but did lose ground to the Bay Area. At the other end of the spectrum the Northern California region under-performed in job growth, unemployment rates, and growth in average wage rates. Southern California lost jobs but had a declining unemployment rate as many workers moved to other regions or states. The remaining forest, range, and agricultural regions experienced respectable job growth but not enough to significantly reduce unemployment rates or drive wages up.

Forest, range, and agricultural commodities in regional context

Timber is the dominant agricultural commodity in the Northern California economic region and is significant in both the Central Sierra and the Northern Sacramento Valley economic regions (see following table). Cattle and calves are prevalent throughout California as each region has sizeable areas of rangeland. The large number of cattle and calves in the San Joaquin and the Southern Border are primarily raised on farms within irrigated farmland areas and is not comparable to the number of cattle and calves in the other regions. Excluding the cattle and calves raised within irrigated agricultural regions, timber and cattle represent around five percent of the total commodity value of California’s $30 billion agricultural production.

Californians as consumers of forest and range goods and services

Californians as consumers have significant and increasing demands for commodities and services that come from forests and rangelands. Historically, California met a considerable portion of these demands from its forests and rangelands. However for a variety of reasons, commodity production declined during the 1990s. As the demand for commodities such as timber and paper products increases with population growth and increased wealth, the increasing gap between California production and consumption is met via imports.

While California’s metropolitan consumers can continue to meet their demands via imports, the lack of market- and institution-based approaches to increase investments that promote multiple commodities and services is already having strong regional equity impacts. This reality is because forest and range areas are losing some of their historically strong economic sectors. The following table summarizes economic profiles of various forest and range resources.

Production and use trends of selected traditional commodity and ecosystem services in forests and rangelands

Resource	Level of consumption	Supply/availability	Contraints commodity value	Opportunities total ag commodity value (timber)
Traditional commodities and services
Forest products: timber	Increasing	Decreasing availability to new regulations, lawsuits, declining timberland base, and incresed costs.	Global competition, development, exotic species, T&E; species, clean water laws, and tax policies	Long-term plans to lower regulatory costs, new products and niche markets. Certification for sustainable forest management, new technologies, income from complementary products and services
Forest products: energy (biomass)	Increasing	Decreasing but could rise	Initial infrastructure costs, energy pricing policies, high planning and regulatory costs	Improved pricing and policies for renewables, enhanced private investment, and new technologies and products
Agriculture: range livestock	Per capita static; total consumption up	Historically cyclical	Development, exotic species, limits on public forage, water availability, T&E; species, clean water laws, tax policies, and global competition	Improved range management, consolidation, diversification, improved tax/public policies, and new products and niche markets
Recreation	Increasing but uneven among recreation sectors, slightly increasing toward developed sites and wider range of experiences near urban areas	Uneven by recreation sector, quality of some experiences degraded, new experiences emerging, limited access makes some experiences unavailable	Low public funding, maintenance backlog, liability concerns, transport cost and congestion, and environmental impacts of “overuse” of existing sites	Additional funding, new technologies, new products/“experience” sets, more use of private providers and partnerships, and improved access
Resource-based activities in urban areas	Increasing	Increasing where public or private funding is available	Financing, commercial scale facilities, cost competitiveness, regulatory oversight, technology maturity	Landfill mitigation using organics for energy products
Water quantity	Increasing, especially for human and unique water-based habitats	Limited quantity with current shortage growing to 2020	Weather, infrastructure, institutions related to pricing and ground water replacement, and T&E; and water quality laws	Conservation, new technologies and products, improved pricing and demand management, and new storage
Wildlife as a commodity	Increasing, varies by game species	Uneven, varies by game species	Habitat and population dynamics, past land use legacies	Improved habitat, increased private ventures, and new breeding technology
Ecosystem services
Air quality	Increasing	Limited, improving selectivity	Funding, interbasin transport, global climate change, wildfires, continued development and auto use	Improved technology, use methods less harmful to air quality, new institutions for pollution offsets, trading, and dealing with interbasin transport
Carbon sequestration	Increasing where cost is less than CO2 production limits	Increasing	Accounting systems and markets just being developed, existing part of carbon load	Develop accounting and market structure to reimburse sequestration
Water quality	Increasing	Limited, improving selectively	Regulations, past land use impacts, limited restoration funds, lack of sizeable and equitable funding mechanisms	Regulatory change, new technology, more funding for restoration, and improved information
Habitat restoration-fish	Increasing	Increasing	Funding, exotic species, water availability to moderate flows, continued habitat loss, weather patterns, adequate information to support decision making	Successful habitat restoration and management; new technologies; and new institutions for cost sharing/incentives with private landowners; better monitoring protocols being developed; increased funding via water bond initiatives
Habitat restoration-wildlife	Increasing	Limited	Available funding, exotic species impacts, urban development, habitat loss and fragmentation, limited information, and wildfire	More funding, improved information and management, new technologies, policy changes to enhance landowner cooperation
Urban forests/open space	Increasing in communities	Limited, high conversion pressure	Funding and available land base, institutional responsibility for long term maintenance	Enhanced funding, development of new community/non-profit based institutions
Wilderness allocation	Increasing	May increase with recovery of human-impacted areas; may increase or decrease as social concepts of wilderness change	Conflicts with current land uses, lack of management of threats such as exotics, severe fire, etc. May require Congressional action	Increased public and private funding and new institutions
Ecological reserves	Increasing	Limited	Complexity of identifying effective expansion priorities. Cost of acquiring new parcels, exotics, climate change	Increased public and private funding and new institutions

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