×

California economy stands up to nature's wrath

Redding, Calif., firefighters help a resident search for personal belongings in the remains of her destroyed home in Weed, Calif., Sept. 16, 2014.
Getty Images
Redding, Calif., firefighters help a resident search for personal belongings in the remains of her destroyed home in Weed, Calif., Sept. 16, 2014.

When it comes to disasters, California can't seem to catch a break.

Wildfires are scorching thousands of acres. Floods and droughts are unleashing havoc on homeowners and farmers. Last month, an earthquake destroyed thousands of barrels of Napa Valley's world famous chardonnays, malbecs and pinot noirs.

But while the impact of a spate of natural disasters is being felt unevenly among industries and regions, economists say the Golden State's economy is unlikely to suffer overall.

Like much else that happens in the country's most populous state, California has been experiencing more than its share of nature's wrath. After a series of temblors in March, Napa Valley wine growers last month woke up to a 6.0 Richter scale jolt that made a mess of some 120 wineries and inflicted an estimated $300 million in damages.

This weekend, thousands of firefighters are battling more than a dozen wildfires consuming tens of thousands of acres. State officials say this year's fire season, which runs from May to October, is on track to be the most destructive on record. A devastating three years of drought has dried out brush and trees, helping fuel the flames.

That drought has also left the state's farm industry scrambling to find water to save parched crops and livestock. In January, Gov. Jerry Brown declared a state of emergency and called for a voluntary 20 percent cut in water use statewide. Last week, Brown signed a series of bills to help ease water shortages that are expected to cost the state an estimated $2.2 billion in lost crops, jobs and other damages.

Read MoreCalifornia's water rules: Easing or aiding drought?

Those losses are likely to continue. Climate scientists say California—along with much of the western U.S.—could be in for a long dry spell. But while individual homeowners and businesses will feel the impact severely, California's overall economy is weathering the disasters well, economists say.

Dallas-based Comerica Bank, which maintains an index that tracks the California economy, says the indicators are trending higher.

"We expect to see ongoing gains for the California economy through the second half of 2014," said Robert Dye, Comerica's chief economist.

Read MoreDrought is so bad, change California flag: group

One reason is that—despite the devastating impact on households and individual business—California's economy remains one of the largest and most diversified in the world. If it were a country, California's $2 trillion gross domestic product would rank seventh.

"While the drought is real, and it will cause economic losses, particularly in certain agricultural quarters, overall the state is not likely to be greatly impacted," UCLA Anderson economist Jerry Nickelsburg said a report on the drought's impact earlier this year.

To be sure, the drought has hit farmers hardest. Agriculture consumes about 80 percent of the state water supplies, and produces about half of all the fruits, nuts and vegetables consumed in the U.S.

But farming represents only about 2.5 percent of the state's employment. And while the drought has wiped out farmers who've run out of water, lower yields of many commodities have raised prices for the majority who are still in business.

That's helped boost incomes for farmers who still have water. California's total revenue from agriculture, forestry, farming and fishing jumped to nearly $47 billion last year—up from $25 billion in 2009.

Overall, the states gross domestic product has bounced back strongly after the Great Recession and housing bust, expanding by 3.6 percent last year—well ahead of the national pace of just 2.2 percent.

California's job market remains relatively weak—with statewide unemployment at 7.4 percent as of last month, higher than the national 6.1 percent level. But that average masks a wide range of job prospects—depending on where you live.

Read MoreCalifornia governor signs ridesharing insurance legislation

Among major metro areas, El Centro has the highest jobless rate—nearly one in four of those in the labor force are out of work.

Meanwhile, thanks largely to an ongoing technology boom, the jobless rate has fallen below 6 percent in San Francisco, San Jose, Santa Rosa and Napa.

California's housing market—once the epicenter of the industry's collapse—has rebounded in many parts of the state. The share of houses seeing prices rise in value is well above the national average, according to data tracked by Zillow.

And after struggling for years to rein in spending and tame a large pile of debt, officials in Sacramento have apparently steered the state's finances on a more sustainable course. In June, bond rater Moody's upgraded the state to an Aa3 credit rating, citing a "rapidly improving financial position," declining debt, and strong job growth.

CORRECTION: Moody's upgraded California to an Aa3 rating.