Gloomy outlook for California’s economy
December 19, 2013
• California Lutheran University economists see a state of declining opportunity
• Nation’s economic growth not much better
Scrooge, at least the pre-ghosts-visit Scrooge, seemingly lives in the halls of California Lutheran University.
There one will find economists with a most gloomy outlook for California’s economic future. And there’s barely a glimmer of more optimism for the nation’s economic outlook.
In brief, CLU’s Center for Economic Research and Forecasting says:
• “We expect continued slow GDP and job growth in California. GDP is likely to remain below 3 percent, while job growth will be even slower, below 1.5 percent.
• “We believe that a slowdown in the rate of increase for California’s median home price will happen very soon. It may have started already.
• “The real story in California’s population data is that population growth has been anemic for about a decade. We believe this is an indicator of declining opportunity.
• “California's post-recession job gains have been concentrated in the Bay Area. In fact, the region is now down fewer than 7,000 jobs from its pre-recession level. Southern California, by contrast, is still down more than 360,000 jobs from its pre-recession high. The Central Valley, California's slowest growing region, is down more than 120,000 jobs.
• “We think California is seeing a transformation from being primarily a producer of tradable goods – goods that are produced in one place and consumed in another – to being a producer of non-tradable goods. Non-tradable goods producers compete only with other local producers, who face the same cost structure. Since non-tradable goods production is a much smaller market, California is likely to continue to see its share of United States jobs decline.”
The state’s housing industry, which was among the hardest hit in the nation by the mortgage meltdown, has recently seen a rebound in home prices.
“We're quite confident that the rate of price increase will decline, but the rate will vary across geography as well as time,” writes California Lutheran University Center for Economic Research and Forecasting Executive Director Bill Watkins. “In general, coastal markets will be stronger than inland markets. Inland markets will be more impacted by changes in the local economy than will coastal markets. So, prices and sales are likely to be stronger in Bakersfield, where oil is driving a local economic boom, than in San Bernardino, where economic growth is dismal.”
He also notes that California hardly has a unified economy. “Geography is always an issue in forecasting or discussing California's economy, because California is really a collection of regional economies, and these regional economies are remarkably unrelated to each other. The Bay Area's economy has been very vibrant, but it's had little, if any, impact on Los Angeles' economy and even less on the Inland Empire's” he says.
For the nation, the CLU economic forecast, released Thursday, says, in brief:
• “We expect U.S. economic activity, or gross domestic product (GDP), to grow at a rate of less than 3 percent, just like we did in 2010, 2011, 2012 and 2013.
• “We expect jobs to grow at a less than 2 percent rate, just like we did in 2010, 2011, 2012 and 2013.
• “We expect unemployment to slowly decline, more as a result of discouraged workers leaving the labor pool than of vigorous job growth, just like we did in 2010, 2011, 2012 and 2013.”
As the report puts it, “We shouldn't be happy with economic growth this slow.”