Report: California’s jobless rate to taper slowly
December 15, 2011
• Worse for the Central Valley
• ‘Economic joints are becoming arthritic’
California, which once led the world in economic vigor and change, is now resistant to any change, its economic joints becoming arthritic, its arteries clogged, says a new report from California Lutheran University’s Center for Economic Research & Forecasting that paints a grim future for the Golden State.
And it is even gloomier than the Tule fog that envelops the Central Valley at this time of year when it talks about the future of the Valley.
“California’s Great Central Valley will remain very weak with very high unemployment rates throughout the forecast horizon,” says the report, written by CERF Executive Director Bill Watkins.
It’s almost a tale of two states: Inland California where little hope is seen by the authors of the report, and coastal California, where “what recession” would seem to be the mantra. “Coastal California, with its wealthier population and stronger home prices, will continue to enjoy lower unemployment and relative prosperity,” the report says.
It says the San Francisco Bay Area and San Diego will continue to be centers of technological innovation, but that’s where the bucks will stop.
“The regions will fail to realize many of the economic benefits of that innovation. The innovation may occur in California, but the jobs and economic growth will occur outside of California,” the report says.
Overall, California’s economy is expected to lag behind the U.S. economy, the CLU report says. While the state’s unemployment rate will slowly fall, it will remain stubbornly above the U.S. rate and “businesses will continue to avoid California as best they can.”
California’s home prices will remain weak relative to past prices, it predicts.
The report notes that current residential prices are significantly below those of a year ago in most markets.
And, says the report, “there is some disturbing evidence that the data, weak as it is, may understate real estate's weakness.”
The report places the blame counter-intuitively – on home ownership rates.
“They are still too high. While newspapers are reporting falling homeownership rates as bad news, the fact is home ownership rates need to reach an equilibrium, at a lower level than during the boom, before real estate markets can recover,” the report says.
And that, it says “could take a couple more years.”