I have recently spent some time studying the mammoth size and diversity of the California economy and its output, and the numbers are striking. Its total output is the fourth largest economy of the world, only behind the United States ($30.5 trillion), China ($19.2 trillion), and Germany ($4.7-$4.9 trillion). At $4.1 trillion, the Golden State economy is larger than each of the economies of Japan, India, and the United Kingdom. California output grew at a rate of 6 percent in 2024, outpacing the U.S. (5.3 percent), China (2.6 percent), and Germany (2.9 percent), making it the fastest-growing among the top four.
The state’s economic output represents an astounding 14 percent of the entire U.S. gross domestic product. It’s economy is highly diversified, with major contributions from technology (Silicon Valley), entertainment (Hollywood), agriculture (the Central Valley), manufacturing, and international trade (major ports in Los Angeles and San Francisco). It is home to some of the world’s most valuable companies and the highest number of Fortune 500 headquarters among U.S. states. Its economic influence extends beyond its borders due to its leadership in technology, entertainment, agriculture, and green innovation. In addition, the state is a global hub for venture capital and new business formation, further fueling its growth. Earlier this year, it was announced that the state’s population increased for the second year in a row. Tourism has hit record levels, as Los Angeles prepares to step onto the world stage as the host of the 2028 Summer Olympics.
But for all that, there are rising signs that California is entering one of the most difficult periods in its history. The state is confronting what many leaders and officials say is an unprecedented confluence of forces—economic, political, social, environmental—that’s about to test its long record of resilience in the face of catastrophe, natural and otherwise. Since the devastating fires that occurred recently in southern California, more has been written on the Golden State’s future challenges. Some have questioned its ability to thrive in the years and decades to come and wonder if its leadership role as America’s most prosperous state is sustainable over the long term.
For example, take the population figures: at least one popular publication wrote those population numbers may prove to be a mirage. Analysts say the state’s population could well decline because of the wildfires that wiped out more than 6,000 homes in Los Angeles in January and because of the Trump administration’s immigration crackdown. Many young people are moving to other states to escape a housing shortage, leaving behind an aging population in a state that has long been a symbol of youth and energy. The population growth of the past couple of years has helped dispel the notion that people were fleeing the state. But demographers have raised concerns about the population trends, even before the fires. Nearly 200,000 Californians between the age of 20 and 29 left the state from 2020 to 2023.
Since the Gold Rush of 1848, California has been an American beacon of reinvention, creativity and opportunity. With its abundant natural resources, wealth and beauty, it has powered through disaster after disaster: the collapse of the defense and aerospace economy in the late 1980s, the Loma Prieta earthquake in San Francisco in 1989, the riots in Los Angeles in 1992.
And to be sure, the biggest difference today compared to the difficult chapters California has weathered since its founding in 1850 is the presence of a president who has expressed hostility toward the state. Donald Trump and Washington Republicans have sought to unravel signature California policies and projects on auto emissions, electric vehicles, high-speed rail, and water and forest management. Trump has said he would only consider granting California emergency assistance if the state bowed to a shifting list of demands, including implementing voter ID requirements and changing the way it managed the state water supply.
On the construction front, California produced 33,138,000 cubic yards of concrete in 2024, or 8.7 percent of the national total. This contrasts to production highs of over 56 million cubic yards during the boom years of the sub-prime housing bubble of the mid-2000s, and the 23 million cubic yard difference could take years to recover.
But don’t bet against California’s future. I won’t.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on Twitter – @allenvillere.