This page has been archived and commenting is disabled.
California’s Ballyhooed Recovery? Oh Dude!
Wolf Richter www.testosteronepit.com
There’d been some excitement on Monday about the manufacturing Purchasing Managers’ Index (PMI) that had edged up to 51.5, from 49.6 in August. The first month above 50—indication of growth in US manufacturing, however feeble—after three consecutive months of declines. Halleluiah. But in California, despite the current hype, the manufacturing index suddenly collapsed.
“Manufacturing” in California is to be taken with a grain of salt. Much of it migrated to low-wage countries like China and Mexico. In Silicon Valley, once the center of high-tech manufacturing, chip startups are “fabless”; they design chips and outsource manufacturing to foundries in China. The iPhone and similar devices have never been manufactured in the US. Computers are manufactured worldwide, not in California. The big thing these days is software in all its forms, from run-of-the-mill photo-sharing apps to “Big Data.” And everyone wants to create “the next Facebook.” Um, well, minus the IPO fiasco. Biotech research outfits are sprouting up. And then there is Tesla, the electric-car startup, trying to make a go of it at a plant where GM and Toyota had thrown in the towel. It’s burning through hundreds of millions of dollars in investor money, taxpayer money, and customer deposits, and it hasn’t manufactured very much yet. So “manufacturing” in California needs quotation marks.
But even the VC-funded bonanza in the Bay Area appears to be drying up. VCs are still making deals at a good clip: $4.16 billion in the second quarter, up from $4.04 billion for the same period last year. But the Facebook IPO fiasco—you still can’t have a conversation around here without it—and other IPO fiascos have weaned limited partners off their wildest dreams. And they’re having an impact.... on fundraising. Ever more VCs are chasing down fewer and more skeptical investors who, inexplicably, have become reluctant to part with their money. It has been a “dismal fundraising climate.”
The trend has been going on for several years, as investments by VCs have outpaced their ability to raise funds. At some point, these funds will be drawn down, and investments in startups will wither. We’ve been through this before. And it might be at the cusp of happening again. It will take the sheen off the Bay Area. Meanwhile, manufacturing in Southern California, where this exotic activity is still practiced, is leading the way.
California has its own manufacturing PMI, the Inland Empire Report on Business, sponsored by San Bernardino and Riverside Counties in Southern California, commonly called the Inland Manufacturing Index. After the recent high of 60.8 in March—above 50 indicating growth—it zigzagged down to 52 in August, and then in September, it crashed to 43.4—the lowest level since September 2009.
All five key components were weak. And three fell off a cliff: Production tumbled from 55 in August to 37.5 in September; New Orders—a harbinger of pain to come—fell from 52 to 37, and Exports fell from 51.1 to 35.7. “Disturbing,” the report called it.
So, with orders, production, and exports going south, the employment index sank to 44.6, indicating declining employment in manufacturing for the first time since December 2011. But thanks to the serial and now infinite QE, the Bernanke effect has kicked in: one component actually rose to 64.1, namely commodity prices. These higher input costs are adding to the pressures that businesses face.
Optimism about the local economy for the next quarter dropped sharply, replaced by outright negativism: 42% of the purchasing managers now expect the economy to be weaker, a jump from 29% in August. Only 12% felt it would be better. Their comments were largely negative. “Business is real slow” or “slowing orders” were common themes. While there is some seasonality in this index, the fact that it dropped so sharply and, on the way down, blew past the lows of the last three years is troubling—and not only for California.
Nationwide, CEOs believe the next six months are going to be tough; and they’re reacting to it by slashing capital expenditures and jobs—to “reflect global demand flattening out, particularly in Europe and China,” explained Boeing CEO Jim McNerney. The numbers evoke the dark days of 2009 and double-digit unemployment. It’s been a steep and bumpy slide. Read.... The Miraculous Decoupling of Reality, for Now.
And so, California municipalities are cracking: Atwater just admitted it may have to file for Chapter 9 bankruptcy. The 4th local government to fail. Read.... Next in a Tidal Wave of California Municipal Bankruptcies, by hard-hitting Chriss Street.
- advertisements -


Who gives a flying fuck? We have to wait on the friday jobs report, no news matters till then.
They seem to be doing that a lot lately. Focus on one thing, throw the rest out which means high probability the one thing they shift everyone's attention to is going to be nothing short of spectacular.
This fucking game won't work forever.
the fascist regime will tout JOB creation and the masterful delusions of our king with 6 jobs created....long live the blue state fascist slavery model.
oh and its bush's , i mean romneys fault
I've been telling cali for years to cut the illegal alien lifeline and that if they didn't they would go broke. Now look...
The libs there will blame the conservatives for ALL of this. Proof positive that liberalism and conservatism (America's true ideals) are no longer compatible and the country should be broken up into two pieces for each side to govern as they see fit. The liberal side will be in ashes within a decade since they will no longer be able to leech off the conservatives to feed their base.
i agree....end the blue state slavery model of death....let them eat , well you aint getting my shit
BUT, BUT, BUT the iPhone is designed in California - it says so on the box next to where is says "Made in China"
I can tell you know very little about business. Folks would not be able to afford Apple products if they were made here. You can always bust-out with the arguement of where people are gonna get the $ since almost all that is left are low-paying jobs. I actually don't give a screaming fuck about that! Just wanna fill my bag and flip you off on the freeway as I drive past yea at 110 mph in my Lambo. Fuck you, I won! A lot of jokers well still be sitting in their bedrooms, in their underwear, pounding on their keyboards, making hyper negative comments to this blog. Perhaps you should look in the mirror. Meanwhile I'll be on the beach collecting 4.8%...........
Not bad for a retard who cannot even know how to use a spellchecker, nevermind how to spell.
Your one of those stupid, mother-fucker assholes, still living at home in the bedroom you grew up in. Another jerk-off, self appointed English teacher! When all else fails, critize the grammer and spelling. Truth hurts does,nt it! Still with mommie and daddie and flipping burgers. I,m not using a spell checker on this either fuck head. I'll still be collecting 4.8% on the beach while your still at mommie's hse. pounding on a keyboard, in your bedroom, in your underwear............... Oh by the way, spell checker did not fix this either..........go phuck yoouurr delf
Little advice for ya junior. Before you go to the beach get a fucking book on how to spell and construct a proper sentence. Lambo my ass
Send e-mail asshole< I,ll send a picture w/ me flipping u off!
Hey loser jaskass,
Send yea a picture of my Lambo fuck head!
I bet he parks right next to MethMan's Lambo --- you know, the one with the personalized license plate that reads "ONLY$5".
That,s ok tuff guy. You study your sentence structure while I'm laughfing all the way to the bank! Did mommie fold your underwear right?
All our design work and manufacturing is done right here in So. Cal.......
ps we have looked at Tawian, China, India, other places. Even with the higher wages I pay, makes since to stay here. Don't forget, all the robuts need is some maintenance and electricity..............
FYI-----My business is booming. We do contract electronic assembly with robuts. We also have a Internet acceptance division that has taken off like a rocket. Fuck the banks! Don't have one loan with the bastards. All private investors that are in it for a backend piece. Everyone is making $ including me, the majority owner. There is a downside since I'm to about 65 hours a week! Girlfriend just left me since she said I don't spend enough time wih her. Thats ok she was becomming a real bitch anyway! Now I don't have to do the break-up. I'm really sorry there is so much negativity on this blog. I sometimes fell this is the cry baby blog. I'm well aware of the fact that pulling yourself up the booystrap is gett'in harder and harder. But fuck man, I did it! I did'nt even finish high school.
8 ZH'ers can't handle a successful businessman.5 can!
"I did'nt even finish high school."
How TF did you get on this blog?
Who the fuck r u? Self-appointed pig of Zero Hedge! Fuck you, got more than you! Did mommie cook your eggs right?
I don't eat eggs, but thank you for asking.
If I offended you, then FU too.
u did'nt offend me, but just for fun, stick one up your ass..............
Apparently, you did not finish charm school either.
actually i did finish and failed. i shot the instructor.
OK, now that was funny!
did mommie fold your underwear right?
What is "underwear"?
Well done San Ova!
California new name = State of Confusion ... save Golden for somethng else
Absolutely classic from 1983, the early days of MTV
The Kinks, 'State of Confusion' ... so true:
« Lyin' awake in a cold, cold sweat
Am I overdrawn, am I goin' in debt?
It gets worse, the older that you get!
No escape from the State of Confusion I'm in ... »
http://www.youtube.com/watch?v=3l44VVr4azI
Twenty California counties, including Ventura, Kern, Los Angeles, Orange and San Diego, allow some workers to make more in retirement than they did while working. The coffers are underfunded by millions of dollars.The scope of the practice is unclear because counties have resisted releasing complete pension data, citing the difficulty and cost of assembling the information.
But an analysis by The Times of partial data from Ventura and Kern counties — two small windows into the problem — shows that spiking is affecting pension systems already staggered by massive obligations.
In Ventura County, where the pension system is underfunded by $761 million, 84% of the retirees receiving more than $100,000 a year are receiving more than they did on the job. In Kern County, 77% of retirees with pensions greater than $100,000 a year are getting more now than they did before.
http://articles.latimes.com/2012/mar/03/local/la-me-county-pensions-2012...
Maybe we'll get hit by that every 130 year earthquake the so called "big one." Then money should pour in for the rebuilding of everything still above water. We will be doing great. In the meantime get yourself an Obamaphone and EBT. It is warm enough. You can sleep outside.
"The Late Great Golden State"
http://www.youtube.com/watch?v=zW704NwL8iU
Hot girl in gold pants and a golden bathtub to start, give it a minute, "Eureka".
Is Arnold still populating that state?
[rim shot]
I'm going back to Cali, Cali, Cali ....... I don't think so
Quit knocking Cali -- they've got some very rare tadpoles that no other state can claim
I would love to f##k Nancy Pelosi, and I'm not talking about sex.
Pelosi owns a couple of wineries and managed to stear some stimulus money to herself, and her celebrity and 1% neighbors, for creek habitat restoration. Apparently it took millions to make sure no vines were planted too close to the creek (like any winery would be stupid enough to do that in the first place) and let the weeds grow. Then there was some kind of fish run set up one one of her properties so she could become partially exempt from Calif property and income taxes. That hypocrite is very well versed in Calif tax loopholes and takes advantage of as many as possible. I researched her for a couple of hours on the internet after I became sick and tired of hearing clueless friends go on about how she really wants to help the little people. Managed to uncover quite a bit more. Stupid republicans never used any of her self enrichment and tax dodges during campaigns. You would think they wanted her to win.
I read the first half of your post and choked on my whiskey. Man...what an ugly vision...a naked Pelosi...
well look man she does have knockers you gotta admit....just sayin'
But with all that liquid nitrogen running though her veins, those old jugs are frosting near zero K.
Nancy Pelosi going hog wild over bailout's for Wall Street will indeed be one of history's Great Mysteries. OH WELL. I'm from New York! "We sucked your gold out before...guess what we're doing now?!"
In case you didn't know it, The Grove, on the corner of Mission and 3rd (kittycorner to Yuerba Buena and a half a block from SFMOMA), is where to find out about the gaming/social website boomlet. Everyone goes there, because they never quite got the social scene venues together in SOMA.
Anyway, all the money is drying out and there's about to be huge "consolidation" in these industries with big layoffs and everyone back to Ohio with whatever money they could pull out of this wreck.
Oh and that real estate recovery thingy? Chinese with cash in the trunk. That's over too. See ya!
...aaah memories of mission st. i used to stay at the hotel bijou down the street on mason & eddy. hookers in the street and crackheads pissing on the walls. excellent new york style deli place somewhere down there with excellent breakfast.
Who in their right mind is still manufacturing anything in California? Maybe if you still have some yet to be depreciated cap.ex, but otherwise, with it's terrifying array of anti-business regs, you'd be stupid not to pick up shop and move to Asia or Nevada.
We are. And you are correct. It is increasingly difficult, mainly due to state and local regulations. However, I like the weather here, not to mention all the great things to do around the Bay Area. Plan to stay as long as possible. Intended to accept a good job in Virginia in 2000. The place looks like a park. everything was green. However, the humidity was unbearable and the insects were so loud it was like someone was running power tools at night. Couldn't breath. And I encountered hot fog on another trip to Boston. What the heck? Hurricanes, noreasters, ice rain, tornados, stifling and sticky heat/humidity on the east coast. No thanks!
It doesn't hurt that we recently picked up sizeable new customers returning from having manufactured in China and Malaysia. Turns out that engineering knowhow, high precision and quality are difficult to come by in those countries.
Time for Chablis
Drive through the Central Valley and look at all the fallow land because the government refuses to allocate the water resources. I got your recovery. Right here in the palm of my hand.
No shit there, green on one side of the road and desert conditons on the other. All becuase some fucking bleeding heart is worried a little fish's population might go down a number so small it's barely a blip.
Only in Cali is there such stupidity, it simply amazes me.
Actually I think they released some of the water as part of the deal to get votes for Obamacare if I remember the news correctly. The Dem's weren't against using water as coercion to get that insurance cartel hooked up.
New spin on 'date palm' eh ese?