Despite some healing in the national economy, California still faces significant difficulty, in part because of the state's budget woes, economic forecasters at UCLA say.
Unemployment in the state will reach 12.1% by the end of this year and will not return to single digits until late in 2011, economists predicted in the quarterly UCLA Anderson Forecast, which was set to be released today.
"California is in for a continued rough ride for the balance of 2009 and is not going to see economic growth return until the end of the year," wrote Jerry Nickelsburg, senior economist at the forecast.
Driving California's difficulties are a shrinking state budget, a disappearing non-residential construction market and sluggishness in housing construction.
Construction jobs, which fell 12% in 2008, are expected to drop more than 15% this year as demand continues to fall for both residential and commercial development. Already, activity has dropped so dramatically in the state that developers are now under-building for the size of California's population, sowing the seeds of another housing bubble, the report said.
The state's fiscal woes make the picture bleaker. The budget for the 2009-10 fiscal year will probably lead to program cuts and layoffs on top of spending decreases in last year's budget.
"California's state government . . . has no choice but to contract at the worst time," Nickelsburg wrote.
The cuts don't affect only government jobs. Some of the program reductions will be in healthcare and education, damaging two sectors that haven't yet experienced massive job losses in California during this recession.
Bill Watkins, executive director of California Lutheran University's Center for Economic Research and Forecasting, agreed with the Anderson group that California faces a rougher road than the rest of the nation.
"California's economy is quite a bit weaker than the U.S. economy, and we don't expect to see a recovery any time soon," he said. The state will not come out of recession until the second half of 2011, he predicted.
The state's regulatory agenda is making it more expensive to do business here, and higher-education cutbacks will probably affect the state's competitive advantages in the long term, he said.
The situation looks a little less bleak nationally.
"It looks like we're beginning to come out of it, and that the worst is over," said UCLA senior economist David Shulman, who wrote the national section of the forecast.
