Economists say California’s slow population growth a concern
March 19, 2013
• Warn that real estate recovery may not persist
• “I think we conclude that California is probably gaining jobs, but at a modest pace”
Low births and more people moving out of California than moving in have resulted in the slowest California population growth rates ever observed since the beginning of the 20th century, according to a report released Tuesday by the California Lutheran University Center for Economic Research and Forecasting.
It’s only a matter of time before California’s population declines and at that point, all of the states problems will be much harder to solve than they are today, the report says.
For eight consecutive years, more people have left California than have come to California – something unprecedented going back to 1905, the report says.
And there’s more potentially bad news spotted by the California Lutheran University economists.
There’s a basic problem with the basic numbers, says CERF Executive Director Bill Watkins.
“There are a bunch of problems with California’s jobs data. We haven’t had a data release since December’s, as the state works through the revisions the Bureau of Labor Statistics recently put out. So, we have old data,” he says. “Even worse, there are reasons to doubt California’s December jobs numbers. They reported a sign reversal from previous months’ data, showing a loss of 17,500 jobs after seven consecutive months of job gains.
“By itself, that reversal is not a big problem. In fact, it’s consistent with our understanding of California’s structural weakness. However, the data show that a huge percentage of the job losses were outside the major metropolitan areas. That’s possible, but the implied volatility of the non-metro areas is significantly greater than we are used to seeing,” says Mr. Watkins.
“I think we conclude that California is probably gaining jobs, but at a modest pace,” he says.
The bad news washes into the state’s housing market. Mr. Watkins questions whether it’s really recovering. Foreclosures are falling, but they remain high. The state’s home-ownership rate continues to decline. And, he says, it looks like the declining trend in home sales persists.
“Everyone seems to be excited by the year-over-year increase in California residential prices. However, we saw similar numbers in 2010, when the year-over-year price increase reached 24.3 percent in May of 2010. Then, prices declined again,” he says. “Other data don’t reflect a residential boom.”
Residential home prices will not vigorously recover until the U.S. homeownership rate falls to about 65 percent, CLU says. The rate is approaching 65 percent, and U.S. home prices appear to be recovering.
Commercial properties have not shown the strength that homes have recently because commercial property demand is tied very closely to job creation, it says.
“The most likely case may be that the rising interest rates will choke off the recovery in U.S. home prices within the next two or three years. This would be the result of the Fed increasing interest rates even if job growth is not robust,” the report says.
“Overall, we’re seeing some strength in U.S. residential markets, but its persistence may be limited. It’s too early to break out the bubbly,” saus the university.