UCLA economists issue gloomy California forecast
The state's housing sector will rebound next year, but its broader economy will struggle for months after that, the UCLA Anderson Forecast says.
Housing prices will hit bottom some time next year, but the California economy will be in distress for months to come, according to a closely followed UCLA economic report scheduled to be released today.
In a series of dire predictions echoed by experts throughout the state, the UCLA Anderson Forecast says that unemployment will continue to increase, consumer spending will decline and tax revenues will plummet.
"We can expect 'doldrums' to be the operative word describing the California economy over the next 18 to 24 months," said Jerry Nickelsburg, an author of the quarterly report on the national and state economies.
Government layoffs and job losses in sectors such as retail, he said, will offset any benefit from the settling of real estate prices.
Economists and business owners said the UCLA forecast -- which predicted the current housing bubble -- matches their expectations and the experiences of Californians.
The proposed $700-billion federal bailout of the financial system will have little effect on these longer-term trends, several economists said.
The massive government relief plan, if implemented, will stop the downturn in housing, said Stephen Levy, director and senior economist at the Center for the Continuing Study of the California Economy in Palo Alto, "but is unlikely in the short term to reverse the sharp falloff in wealth and the loss of jobs that's already occurred."
The problem is that the housing crash caused severe job losses in construction and finance, and pulled down property values and consumer spending, leading to a shortage of tax revenue for the state. So even if housing levels out, it will take months or years to repair the damage in other sectors.
"By mid-2009 we don't see [construction] being a drag on the California economy anymore," Nickelsburg said. "Other services and government will become a drag."
State and local governments are now seeing property tax collections fall because of lower property values and foreclosures. Sales tax revenues are also slipping as strapped individuals spend less.
Government employment declined by 6,000 jobs from July to August, according to state figures. Retail jobs are also being cut in areas such as clothing, electronics, sporting goods and building and garden supplies, the UCLA report said.
