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California's economy to see sluggish recovery this year, UCLA economists say

But the state's inland areas are likely to lag behind the coast, according to the UCLA Anderson Forecast.

June 15, 2010|By Alana Semuels, Los Angeles Times

California stands to gain some jobs this year but recovery will be sluggish, and the state's inland areas will bear the brunt of the continuing economic pain, according to a forecast scheduled to be released Tuesday by UCLA's Anderson School of Business.

The state's unemployment rate will average 12.1% this year, economists said, and will not return to single-digit levels until 2012.

"We're going to have slow growth this year, accelerating in 2011 and 2012," said Jerry Nickelsburg, senior economist with the UCLA Anderson Forecast.

California's recovery will depend heavily on the behavior of shoppers across the country. Retail spending drives traffic at Southern California's ports and in its inland logistics centers, which are major regional employers. But U.S. consumers are unlikely to splurge until businesses start hiring again, which will happen only gradually. The U.S. unemployment rate will decline slowly to 8.6% by 2012, according to the UCLA forecast, with U.S. gross domestic product growth staying below 3% in 2011 and 2012.

In California, growth in healthcare, education and technology will be strongest in coastal areas, economists said. Inland areas will be dragged down by their excess housing inventory and state budget cuts, which will affect rural inland areas where government workers make up a significant percentage of the workforce.

"The inland parts of the state are facing the same kind of structural change that Los Angeles faced with the aerospace contraction of the 1990s," Nickelsburg said.

Los Angeles will benefit from its coastal location and recover from the recession more quickly than the state, forecasters said, as international trade and consumer spending in other parts of the country rebound.

"With its natural, deep-water harbor, large-scale logistics industry and export-oriented manufacturing, L.A. is well positioned to benefit from an export-driven expansion," economist Julia Thornton Snider wrote.

Yet job growth related to exports, logistics and manufacturing will be partially offset by layoffs in local government.

The gloomy predictions were similar to a forecast released by Chapman University this month. Economists there called for a weak but sustained recovery. Chapman economists said the state would lose 198,000 jobs in 2010, but add 182,000 in 2011.

Chapman economists blamed the state's sluggish growth on the construction meltdown, saying it would continue to lead to job losses this year. New jobs in 2010 and 2011 will be created in the services sector, economists said.

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