Newspaper Article

Will Economy Feel California's Tremors?

By Jon Hilsenrath and Rhonda L. Rundle

2001

Overview

Mr. [Helmut Ackermann] depends on natural gas to operate the massive boilers and heaters used to color and dry fabrics. He expects his December gas bill to have jumped to $600,000 from $132,000 last January. Hammered by the soaring costs, he has already closed one plant and dismissed 40 people. Now, he says the jobs of his remaining 660 workers are in jeopardy. \"If it stays the way it is, we won't be around very long,\" Mr. Ackermann says. Some Wall Street economists worry that California's problems could spill over and hurt the broader U.S. economy. In a report titled \"California Unplugged -- A Drag on Global Growth?\" Morgan Stanley Dean Witter warns that California's energy crisis threatens to push up production costs and make U.S. exports from the state, which totaled $102.9 billion in 1999, less competitive on world markets. Other states facing economic and financial trouble wouldn't warrant such attention. But California not only is the nation's largest state in terms of both population and economic heft, but the Golden State also seemed to epitomize the New Economy. Job growth in the state has been double that in the nation as a whole; of the 2.1 million jobs created in the U.S. during the first 11 months of last year, one of every five new hires was in California. The state produced more than $1.2 trillion in output in 1999, making it the sixth-largest economy in the world, slightly smaller than the economy of the United Kingdom and a little bigger than that of Italy. The state's economic output contributed about 12% of total U.S. gross domestic product. New York, in second place, had an 8.1% share of GDP.

• Publisher: Dow Jones & Company Inc
• Subject: Costs / Economic impact / Economists / Energy shortages / GDP / Gross Domestic Product / Power supply / US exports