SAN FRANCISCO — With the California economy in the doldrums, a measure has cleared the state legislature that would revive the role of a state agency abolished in 2003, similar to that of the U.S. Commerce Department, with purview over invigorating business.
California hasn’t had a statewide government agency focused on bolstering, retaining and recruiting employers, as well as promoting international trade, since the demise of the Technology, Trade and Commerce Agency in favor of local governments taking on the role.
With support of business, including the California Retail Association, the legislature voted to create an entity called the Office of Economic Development overseen by the governor. It would build on one created in 2010 that primarily has focused on small businesses.
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Gov. Jerry Brown is expected to sign the measure, which also cleared the Assembly on a 58 to 4 vote, following earlier Senate approval of 29 to 3.
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“The fact that California hasn’t performed economically is undeniable,” said Jim Wunderman, president and chief executive officer of the Bay Area Council, a business-backed public policy group in the San Francisco region. Lacking a state commerce agency has “put California at a disadvantage to other states,” he said.
The state’s economy has been languishing — the unemployment rate of 12 percent is the second highest in the nation next to Nevada’s 12.9 percent.
The need for a uniform approach to promoting commerce, including exports, as a key means to stimulate the economy was recommended last year by the Commission on California State Government Organization and Economy.
The commission cited how the state has slipped internationally in economic scope since 2003 when it was ranked the fifth largest in the world, if it were considered as a country. In 2010, with a $1.9 trillion economy, California measured ninth behind Italy, Brazil, the U.K., France, Germany, Japan, China and the top-ranked U.S.
Exports are a key source of business for the California apparel and textile industries, which have seen shipments increase over the last decade. In 2010, apparel exports were up 43.5 percent to $1.62 billion against 2000, while textile exports gained 45 percent to $891 million last year against a decade earlier, according to the U.S. Commerce Department’s Office of Textiles and Apparel.
While the state’s top three apparel and textile export markets haven’t lost their ranking over the decade — with Mexico ranked first followed by Canada and Japan — the volumes have wavered. In 2010, apparel exported to Mexico declined 27 percent against 2000, while shipments to Canada gained 146 percent and to Japan fell 17 percent.
But the state legislature adjourned before passing another economic measure, one furthered by Brown as a jobs-creating bill, that among its provisions would have benefited apparel makers and small businesses of all kinds. Manufacturers would have received a sales tax break when buying new machinery, and small businesses with up to 50 employees would have received $4,000 in tax credits for each new worker hired.
In a compromise with Republican lawmakers, the governor, a Democrat, sweetened his jobs proposal with some income tax breaks. These benefits would have included reducing the corporate tax rate for most companies by a half percent to 8.34 percent for the first $50,000 in taxable income. But the Senate failed to pass the measure before it adjourned, drawing the criticism of Brown.
As the state economy as a whole continues to lose jobs, the California apparel industry is slightly bucking the trend, posting 13 consecutive months of adding workers, to employ 61,500 in July, which is an increase of 61,200 from a year earlier, on an unseasonally adjusted basis.
Lonnie Kane, ceo of the women’s sportswear manufacturer Karen Kane, with production in Vernon, Calif., and abroad, said the company has been adding temporary employees on an as-needed basis to its domestic workforce of 160 permanent employees. For fall, 80 percent of the company’s apparel will be made domestically in contrast to 55 to 65 percent a year earlier.
“We’ve brought more of our production back” from China, Kane said, citing instances of lower and more predictable costs to produce domestically. “Knit tops we found we could do more and more here,” he said.
However, as far as the governor’s jobs’ bill stimulating business growth, Kane was skeptical how it might help California apparel manufacturers. “I don’t see it as a motivating factor to go out and hire more people without a more positive (economic) environment in the country,” he said.