September 2nd, 2010
03:19 PM GMT
California produces about a quarter of America’s farm production with immigrants from south of the border doing the back-breaking work in the fields of the Salinas Valley, which was made famous by John Steinbeck. But the most visible “crops” sprouting up these days are For Lease or foreclosure signs in the real estate market.
Prior to a recent visit to what would be the world’s eighth largest economy on its own, I was wondering why there are concerns about a second dip into recession. Now I understand those concerns. During a two-week visit from San Diego to San Francisco, you can see what prolonged tough times look like and hear first-hand what business people are experiencing.
La Jolla, a picturesque seaside city of some 44,000 people, has basked in the light of being a bio-technology research hub with the University of California of San Diego providing a steady flow of government and private sector research and development funds.
What a wake up call as we drove through the village to see no fewer than one in four retail shops or office blocks shuttered with foreclosure or lease signs plastered across the empty spaces.
I had no problem driving up to any of La Jolla’s hotels and asking for a room without a reservation - this during peak season - or finding a prime-time dinner table at one of its fashionable open-air restaurants. It was a similar story 90 minutes up the coast in Newport Beach, where one retired industrialist who has lived in the area for nearly a half century said he has never seen anything like it.
It is difficult to ignore the numbers that paint a less-than-glowing picture for what has long been officially designated the “Golden State.” California had three of the top five metro-area slots in terms of real estate price gains nationwide as measured by S&P in the second quarter. Homebuyers rushed to close transactions before a federal tax credit expired. Prices then plummeted nearly 22 percent in July. Another alarming caveat tucked in the reports - more than a third of the sales have been generated from foreclosures, which means there is a great deal of pain being felt in the system.
Most alarming, perhaps, is the fact that unemployment at 12.3 percent is stubbornly high, and nearly three percentage points above the national average. As we finished our journey, we drove on Highway 280 through the heart of Silicon Valley to San Francisco and I realized, yet again, it would be difficult to find a more diversified economy on earth.
The state is home to hubs of high technology, bio-technology, defence and entertainment with leading universities providing the spark for entrepreneurs to pick up the ball and run. At this stage however, fewer and fewer are finding the means to jump into the game. State money is scarce, bank lending tight and signs of prolonged pain in abundance.
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