DeVol pointed to several factors, among them:
• Trade: Exports, which are particularly important to California, have largely recovered. The ports of Los Angeles and Long Beach are recording year-over-year gains of 16 percent for both exports and imports.
• Pent-up demand: Businesses that put off buying equipment have begun investing in IT again.
• Job growth: California has been creating jobs at a faster pace than the nation as a whole over the past year, particularly in professional and business services. And as DeVol predicted last year, job growth is exploding in the Silicon Valley, thanks largely to the rise of social media.
• Housing market: He expects the housing market to improve by mid-2012. The state has worked through much of its shadow inventory, and foreclosure rates are declining, so prices are bottoming out. As employment recovers, so will housing, DeVol said.
Of course, there are some caveats. The state faces real headwinds in the form of a stagnant housing market, weak consumer confidence and policy uncertainty born of political gridlock.
But DeVol said the biggest threat to continued expansion in California actually lies across the Atlantic. If European policymakers don't decisively resolve the sovereign-debt crisis, banking systems and financial markets could be severely disrupted. If that storm hits, the U.S. and California could be in for another mild recession, he said.