Two more years of slow growth in California
March 13, 2014
• Economist says regulation, particularly on carbon, choking economy
• “When a bear market comes, the state will again face deficits”
California’s economy will remain mired in slow growth – including jobs growth – for the next two years, according to a quarterly report released Thursday by the California Lutheran University Center for Economic Research and Forecasting.
The report notes that the state still has about 460,000 fewer non-farm jobs than it had prior to the recession.
The report has some positive news, but even that is tempered. For example, it says the nation has worked out most of the pre-2007 real estate market distortions but the fundamentals necessary for a sustained recovery are not in place. Job growth, household formation and babies are needed, it says.
“Real estate wealth has not fully recovered in the U.S. Small business owners have a much higher concentration of wealth in real estate than the typical American, and their still over-leveraged balance sheets are slowing job growth,” the university says.
California’s current budget surplus will be short-lived, the report says, because of a temporary income tax on its highest-earning citizens and large capital gains reaped during “an amazing year” for stocks.
“When a bear market comes, the state will again face deficits,” it says.
The California Lutheran University report also points to state regulation, especially carbon regulation, that it says “is strangling” California’s economy to little benefit.
“California has one of the most carbon-efficient economies on earth. We would be far better off taxing ourselves half the cost of our carbon regulations and spending that money sending California companies to clean up China’s power plants,” the report says.
And a final warning: “We will have another financial crisis, and because of increased concentration of bank assets in the largest 10 or so banks, it could be much more costly than the most recent crisis,” says the CLU report.