Economy Report: Calif. economic growth slow Unemployment to remain high through 2012

By Jacob Adelman

Associated Press Writer

LOS ANGELES (AP) -- California's economy will continue to grow at a nearly imperceptible rate, with high unemployment keeping the state a year or more away from a quicker recovery, according to an economic forecast released Wednesday.

Despite several bright spots, the state was unlikely to generate enough jobs to tug unemployment down to the single digits until the end of 2012, according to the quarterly Anderson Forecast from the University of California, Los Angeles

"We're growing, but it doesn't feel like it," said the forecast's author, Jerry Nickelsburg. "We're still on the valley floor."

The report noted that the state has recorded steady growth in imports and exports, agricultural production, manufacturing and other sectors this year. Sales tax revenue has also rebounded.

But the resulting employment growth has not been evenly dispersed throughout the state, the report said.

Coastal Southern California was the only region to show net job increases in the first half of 2010, helped along by growth in the leisure, hospitality and other service sectors.

San Francisco Bay Area employment numbers have held steady this year, while inland parts of the state continued to experience job losses.

Unemployment was forecast to decline throughout 2010 and average 12.2 percent for the year after hitting a modern record of 12.6 percent in March. The state's most recent tally put unemployment at 12.3 percent in July. The national rate is 9.6 percent.

Total employment will contract by 0.7 percent in 2010 but should grow at a rate of 1.9 percent in 2011, the report said.

Real personal income was forecast to grow at 0.6 percent in 2010, 2.2 percent in 2011 and 4.1 percent in 2012.

The state economy's revival is dependent on its ability to replace the 250,000 excess jobs in construction and 60,000 sub-prime mortgage processing jobs with other types of work, the report said.

Nickelsburg said he expected residential construction to return to the state's coastal areas, where its biggest cities are located. Populations have been growing in these urban areas, but they have not seen commensurate increases in homes for sale.

But little residential construction activity is expected in Southern California's inland regions and the state's Central Valley, which saw some of the most frenzied building during the housing bubble, the report said.

Some workers with construction skills will find employment on infrastructure projects funded through federal grants, such as bridges, roads and schools, but it could be some time until they are ready to break ground, Nickelsburg said.

"A lot of those projects take a long time to get going," he said. "That's not an instantaneous process."

Still others will need to receive additional education and training to be able to perform the specialized, knowledge-intensive work that will fuel the state's economic growth in coming years.

"Ultimately, sustained growth in California will come from knowledge-based sectors, and job formation in these sectors will be for more highly specialized workers," the report said.

Published: Thu, Sep 16, 2010