Trump Economy Needs California, Which Scorns Trump Economics
(Bloomberg Opinion) -- Wherever he is, President Donald Trump exults in the U.S. economic boom, calling it, falsely, the strongest in history. (He's just recently stopped making the same inaccurate claim for the U.S. stock market.) He even bragged about having a "magic wand" he could wave to conjure jobs and growth. Never mind that almost 13 million of the 17 million jobs created during the 9-year-old expansion, and 71 percent of the S&P 500's rebound since March 2009, occurred when President Barack Obama was in the White House.
Trump is right to be proud that U.S. gross domestic product leads the developed world with an increase of more than 4 percent during the second quarter of this year while unemployment declined to 3.7 percent, the lowest rate in half a century, from 4.8 percent when he was inaugurated on Jan. 20, 2017. And hardly a day passes without Trump extolling his "America First" imposition of tariffs against big trading partners and the demolition of global agreements like the Trans-Pacific Partnership and Paris Climate Accord and his rebranding of the North American Free Trade Agreement.
But the inconvenient truth of Trump's economy is that it looks decidedly mediocre compared to the rest of the globe's when California, a center of both internationalist business attitudes and anti-Trump political sentiment, is excluded from an accounting of national economic performance.
Trump scorns (and is fighting in court) just about everything California promotes, from global climate, trade and clean energy agreements to world-beating technology to protections for undocumented immigrants and higher minimum wages.
But when the Golden State's jobs and publicly traded companies are left out of the equation, he has little to brag about. That's because while U.S. nonfarm payrolls increased 4,063,000, or 2.8 percent, since the beginning of 2017, California represented 14 percent of new U.S. employment and led the country with 555,000 new jobs, a rise of 3.3 percent, according to data compiled by Bloomberg. Remove California from the job market and U.S. employment rose only 2.62 percent, a little better than Japan's 2.48 percent and less than Austria's 2.82 percent. The 19 countries that use the euro showed an increase of 2.41 percent.
Subtract California's big and small companies from the rest of the nation's and something similar happens. During the same 22-month period, the market capitalization of the companies in the Russell 3000 Index of large, medium and small companies increased at an average rate of 46 percent. California's Russell 3000 companies appreciated 64 percent, according to data compiled by Bloomberg. Only one of the other 10 most-populous states had market-cap growth among its Russell 3000 companies that was better than the national benchmark, with a gain of 50 percent. That was Illinois, where Obama launched his presidency and which Hillary Clinton carried with little more effort than she needed in California.
What do California and Illinois have in common aside from voting decisively against Trump? Their companies are committed to global trade.
Among companies reporting sales in the Russell 3000, California firms received at least 48 percent and as much as 66 percent of revenues from their exports (accounting for disparities in corporate reporting) while Illinois-based companies got between 44 percent and 53 percent, according to data compiled by Bloomberg. Texas, by contrast, showed between 29 percent and 39 percent of its corporate sales from abroad.
Without its California companies, the market cap of the Russell 3000 would have increased 40.19 percent, a little less than the 40.26 percent for all the world's companies, according to data compiled by Bloomberg.
Each of the 15 largest California firms operates in foreign countries, with Apple Inc. receiving more than 57 percent of its revenue from overseas, according to its most recent financial filings. The Walt Disney Co. received more than 24 percent of sales outside North America and Chevron Corp. got 59 percent of its revenue from abroad. Similarly, almost all of the 15 largest publicly traded Illinois companies are substantially buoyed by overseas sales, including Boeing Co., 55 percent; McDonald's Corp., 65 percent, and Walgreens Boots Alliance Inc., 25 percent.
If these figures mean anything, they show that the economy is greatest when its companies are internationally minded. Trump is lucky that business leaders in California and Illinois appreciate this, even if he does not.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Matthew A. Winkler is a Bloomberg Opinion columnist. He is the editor-in-chief emeritus of Bloomberg News.
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