California set to become 4th largest world economy, but why can few afford to live here?
SACRAMENTO — Is California's economy now larger than Germany's?
A report published by Bloomberg shows the state is on track to surpass Germany as the fourth-largest economy in the world.
Gov. Gavin Newsom's office points to the booming renewable energy industry, job creation, falling unemployment rates, and growing market values for companies as factors that are driving California's economic growth.
"While critics often say California's best days are behind us, reality proves otherwise — our economic growth and job gains continue to fuel the nation's economy," said Gov. Newsom in a statement released by his office.
While the numbers seem great on paper, one economic expert tells CBS13 they do not tell the whole story about the state's economy.
"California is probably celebrating something too soon, in my opinion," said Dr. Sanjay Varshney, a renowned Finance Professor at multiple institutions, including Sacramento State.
Varshney, also an investment strategist, says while economic growth is good news, it is misleading to glorify California's gains without pointing out its clear problems.
"Look at everything that we have to pay for, and you're gonna find the answer that California is increasingly becoming less and less affordable for the ordinary people, and we are creating this huge gap between the 'haves' and the 'have nots,'" said Varshney.
A gap, he says, is fueled in part by Silicon Valley, a massive industry that doesn't represent the full economic picture statewide.
"Those are the multimillionaires and billionaires in the Bay Area who skew the numbers. The rest of us in California, we are all struggling to make ends meet," said Varshney.
Varshney adds if the industry continues to leave California due to high costs, continued growth will not be possible.
"More and more companies are lining up wanting to take their headquarters to Texas or Florida or somewhere else," said Varshney. "So not only are businesses leaving the state, we have people now leaving the state. That may have an impact on California's growth moving forward."
As California's economy grows to possibly surpass Germany's, it is also home to the worst homeless crisis in the nation, with more than 160 thousand people living unhoused.
"The major driver of homelessness doubling in our community was the high cost of housing," said Bob Erlenbusch, Executive Director of the Sacramento Regional Coalition to End Homelessness.
He says he is not surprised California's economy is growing but adds that more has to be done to help and support vulnerable communities statewide.
"To put it simply, a rising tide raises all boats. With our economy rising, the big question is, are all these smaller boats of homelessness, affordable housing, health care, and low-wage work? Is the economy going to lift up our population or continue to just benefit a few?" asked Erlenbusch.
When it comes to struggling Californians, the governor's office highlights that Gov. Newsom has implemented a $52 billion financial assistance package to help with rising inflation and costs.
It marks the most robust stimulus program nationwide, providing $26 billion in direct payments, $15 billion in tax relief and grants for businesses, and more.
Will California rise to the rank of 4th economy in the world? Some of those numbers will not be available until next year.
One forecast outlined in Bloomberg's report shows California is already ahead of Germany by $72 billion when considering the state's recent growth rate.