California clout?

Politicians touted the state’s economy as being the sixth-largest in the world in 2015. In 2025, they’re telling us it’s No. 4. What they don’t mention is the high cost of living knocks it down a few notches.

How were the economic rankings compiled?

The California report cited newly released global data from the International Monetary Fund and state data from a U.S. Bureau of Economic Analysis preliminary report. The report shows California’s economy growing 1.4% from the third quarter to the fourth quarter of 2024. The average for the nation was 2.4%, with 10 states expected to increase 3.4% or more.

You can see the Governor’s office release here.

Preliminary 2025 numbers from the bureau have these states as the top three in gross domestic product: California, $4.13 trillion; Texas, $2.72 trillion; New York, $2.31 trillion.

What is GDP?

Gross domestic product is the market value of all final goods and services from a state or nation in a given year. Nominal GDP does not take into account differences in the cost of living, and the results among nations can vary greatly from one year to another because of fluctuations in currency exchange rates.

California’s claim

“With nominal gross domestic product of $4.1 trillion, the state now ranks behind only the overall U.S., China and Germany,” said the California Governor’s Office last month, citing data from the International Monetary Fund and Bureau of Economic Analysis. However the IMF projected Japan’s GDP to be $4.34 trillion for 2025 just last October, and IMF data of current prices shows Japan’s GDP at $4.19 trillion. The World Bank ranks Japan’s GDP at $4.25 trillion, third behind the U.S. and China.

International Monetary Fund ranks for April

U.S.: $30.5 trillion

China: $19.2 trillion

Germany: $4.7 trillion

India: $4.187 trillion

Japan: $4.186 trillion

Using these rankings California would have to pass India and Japan to become No. 4.

Looking back

Figures from the California Legislative Analyst’s Office in 2016 had California ranked 6th, and do not include cost-of-living adjustments.

Carlos Bruno of Real Clear Markets recalculated GDP and included the high cost of living in California, and this resulted in the state dropping to 12th place.

Also, Brazil’s and France’s GDP each declined by double figures in the that year.

The downside

CNBC grades the states using 60 metrics for business in 10 categories. California ranked second to last (49th) in 2016 for cost of doing business. In 2024, California ranked 45th.

In the category of business friendliness, California ranked 47th, with Oregon, New Jersey and New York scoring worse.

California score and ranking

Category | 2024 rank | 2023 rank | 2024 grade

Infrastructure | 15 | 26 | B+

Workforce | 11 | 12 | C+

Economy | 32 | 37 | D+

Quality of life | 8 | 19 | B

Cost of doing business | 45 | 45 | D-

Technology and innovation | 5 | 1 | A

Business friendliness | 47 | 47 | D

Education | 24 | 9 | B-

Access to capital | 1 | 1 | A+

Cost of living | 50 | 49 | F

Overall | 23 | 25

Highest costs of living

The World Population Review ranks California as the state with the third-highest cost of living for 2025, following Hawaii and Massachusetts.

The Economic Policy Institute’s 2024 budget rankings show California is one of the most expensive states to live in. The institute’s Family Budget Calculator measures the income a four-person household needs to maintain a modest yet adequate standard of living, compared with the federal poverty line and the Supplemental Poverty Measure. All but four of California’s 58 counties were in the highest monthly cost brackets.

Sources: U.S. Census Bureau, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, International Monetary Fund, World Bank, The Economic Policy Institute, Moody’s Investor Service, S&P Global Market Intelligence, CNBC, California Legislature, California Health Care Foundation