Trendlines: Let’s Talk About California’s Economy

Part of our role as franchise consultants with FranNet of California is to monitor the current economic outlook in our state. We do our best to keep our finger on the pulse of the local economy because we know that it’s an important factor for entrepreneurs and many others in the workforce who might be considering a career transition. Everyone wants to get a read on the room before they make a commitment such as starting a business of their own.

In this edition of our weekly blog, we’re going to share what we’ve been able to research – the good and the bad. When you’ve been in the franchising business long enough, you discover that there can be advantages in both good and bad economic times. Below are some recent facts and information that you can use to make an informed decision about your own plans.

Recession? Or No Recession?

This appears to be the question of the moment. On a national level, we’ve already met the technical definition – two consecutive quarters of reduced GDP growth. But it wasn’t by much, down 1.6% in the first quarter and another 0.9% in the second. Everyone is feeling the pain of an inflation rate that’s hit a 40-year high. But, at the same time, unemployment is at a 50-year low. For the time being, the consensus from economic experts on the national stage is that we’re not yet in a recession, but that could change next year. Or perhaps not.

California’s Indicators

The state has seen some robust growth, driven partially by a strong real estate market and a fairly large state budget surplus built on a foundation of capital gains tax revenue generated by Big Tech. But if property values and other markets begin to sink, so do the projected revenue totals. And though the state boasts about the surplus revenue, California services the highest debt payments (and state pension obligations) in the U.S., just north of $500 billion. As the Fed hikes up interest rates, those payments will balloon. California has also been slower to recover from the pandemic, with the 10th highest unemployment rate and some of the highest income inequality rates.

What to Expect in a Downturn

If the Fed’s aggressive rate hikes cool the economy, in an effort to wrestle with inflation, a downturn is likely. That means corporate layoffs, more unemployment, and a tightening of the lending market. Yet, when the downsizing begins, interest in entrepreneurship tends to surge. This is exactly what happened during the last big recession of 2008-2009. What also follows can be a favorable environment for commercial real estate, available labor, and entrepreneurial opportunities.

If you’ve been considering an entrepreneurial future, we’d love to introduce you to the world of franchising – an advantageous route to business ownership of your own. When you schedule a visit with FranNet of California, it costs you nothing to discover what your options might be. Our role and function are to guide you, advise you, assist you, and support you, so that you can make your own informed decisions on the direction you want to go. Over time, we’ve had the opportunity to work with hundreds of entrepreneurs who ended up owning the business of their dreams – and we can do the same for you. Without the aid of a crystal ball, we can’t predict what’s in store for Californians. But you always have the option to take matters into your own hands. Getting started with FranNet of California is easy, and you can book an introductory session with us by following this link.

Aug 4, 2022