California’s economy strengthened its position as the biggest driver of U.S. productivity growth in 2025, with new federal data showing workers across the state significantly boosted output while supporting continued job creation.
The latest figures reinforce the state’s role as one of the world‘s leading economic powerhouses, fueled by innovation, entrepreneurship, and a growing workforce.
California Leads the Nation in Worker Productivity
According to newly released data from the U.S. Bureau of Labor Statistics, productivity among California’s private-sector, nonfarm workers rose by 4.2% during 2025.
The increase was the strongest contribution made by any state to overall U.S. productivity growth.
Although California accounts for roughly 14% of the nation’s economic output, it was responsible for nearly one-third of the country’s overall productivity increase of 1.8% last year.
Among all 50 states and the District of Columbia, California was one of just two states to record productivity growth exceeding 4%.
Newsom Credits Workforce and Innovation
Governor Gavin Newsom hailed the latest figures as evidence that California’s long-term investments in its workforce and innovation economy are paying off.
He said the state’s employees, business owners, and innovators continue to demonstrate that economic growth, high productivity, and technological advancement can thrive together.
Newsom added that California’s position among the world’s largest economies reflects the strength of its people and business environment.
Strong Productivity Matched by Job Growth
The productivity gains came alongside another year of solid employment expansion.
Over the past 12 months, California added 131,534 jobs, more than any other U.S. state during the same period.
The state also boasts four of the nation’s fastest-growing job markets through the first quarter of 2026, highlighting continued momentum across multiple industries.
The combination of rising productivity and employment suggests businesses have continued expanding while improving operational efficiency.
California Extends Its Economic Advantage
California maintained its economic dominance throughout 2025, continuing a growth streak that has now stretched for 16 consecutive years.
Recent analysis also found that the state’s economy expanded at a faster pace than Texas, the nation’s second-largest state economy.
California remains larger economically than every other U.S. state and surpasses the economies of all developed nations.
Small Businesses Continue to Drive Growth
Entrepreneurship remains a cornerstone of California’s economy.
The state is home to more than 4.3 million small businesses, representing 99.8% of all businesses operating statewide.
Together, those companies employ approximately 7.6 million people, making small businesses a major source of employment and economic opportunity.
California also continues to host more businesses than any other state, including both Texas and Florida, reinforcing its reputation as one of the country’s most active business environments.
State Highlights Broader Economic Leadership
State officials say the latest productivity report adds to a series of indicators showing California’s economic strength across multiple sectors.
Beyond leading the nation in business activity and innovation, the state continues to rank at the top in several key measures of economic performance, underscoring its role as a major engine of growth for the U.S. economy.
