The Legislative Analyst’s Office reports that the current drought will only have a limited economic impact. The SAC Bee has the story:
California’s punishing drought has fallowed farmland and yellowed front lawns, yet it will have little noticeable impact on the state’s overall economy or government revenue, at least in the short term, according to a new report by the Legislature’s nonpartisan fiscal analyst.
“While the drought is affecting many Californians and communities in different ways, we currently do not expect the drought to have a significant effect on statewide economic activity or state government revenues,” Tuesday’s report by the Legislative Analyst’s Office read. “That being said, we acknowledge the drought as a risk factor for the state’s economy, especially if its effects worsen or are prolonged.”
The drought’s effects have largely been confined to the state’s agricultural industry and ag-heavy Central Valley communities. Agriculture, though, makes up about 2 percent of the state’s economy, and agricultural jobs account for 3 or 4 percent of the state workforce, the report said, far from enough to drag down California’s $2.2 trillion gross domestic product.
“Even a substantial decline in agriculture’s share of the economy, such as occurred during and after the 1976-77 drought, probably would have only a limited impact on the overall state economy,” the LAO said, noting that the state’s overall GDP grew during those years.
The problem is no one, including the smart people at the LAO, have any idea how long the current drought will last. While it has not had a big economic impact yet, we maybe on the cusp of a very long drought lasting several generatons. Past long droughts have resulted in major cultural and social changes in the region. Through out the southwest cultures that developed over 100s of year collapsed when the drought lasted more than multiple generations.