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California labor market recovery to go more slowly than predicted, report says

UCLA economists project the state's unemployment rate won't crack single digits until early 2013.

March 09, 2011|By Alana Semuels, Los Angeles Times
  • Thousands of job seekers attend a job fair last month at Angel Stadium in Anaheim. Economists predict employment in California will increase 1.1% this year.
Thousands of job seekers attend a job fair last month at Angel Stadium in… (Robert Gauthier, Los Angeles…)

Economists have predicted that California's labor market recovery would be slow. A new UCLA forecast projects that it could take even longer than previously thought.

The state's unemployment rate will remain in double digits until early 2013, according to a report slated for release Wednesday by UCLA's Anderson School of Management . That's three months later than the university's economists forecast in December, as California's weak housing market continues to weigh on the region's recovery.

"The improvements we were forecasting, dismal as they were, were not quite dismal enough," said Jerry Nickelsburg, a UCLA senior economist.

California's unemployment rate was 12.4% in January, a month when employers added just 12,500 jobs; 2.2 million Californians are unemployed. Rising commodity and oil prices have made employers hesitant to hire.

The California jobless rate will average 11.6% this year, 10.5% in 2012 and 9.3% in 2013, the UCLA economists predict.

Some jobs won't be back. The housing bubble wildly inflated sectors such as construction and financial services. Economists said about 350,000 of the jobs lost in those sectors during the Great Recession probably won't return this decade.

On the positive side, when California starts to gain momentum it will likely grow faster than the nation, helped by exports to Asia that will drive recovery at ports and in the technology sector. Economists predict employment in the state will increase 1.1% this year, primarily in healthcare, professional and business services, exports and technology-related manufacturing sectors.

California will add 152,000 jobs this year, 435,000 in 2012 and 535,000 in 2013, the UCLA economists projected.

Still, California's sluggish growth worries economists, who said the state may be losing out to places such as Texas that have less stringent environmental and other regulations. Although venture capitalists are still investing in California, analysts said, the state needs to remove obstacles to job growth. Most of all, the state needs to focus on its strengths, said Nickelsburg, the UCLA economist.

"Policies which chase after smokestack manufacturing are likely to be relatively ineffective," he said. "Whereas policies which enhance the business climate for those sectors which California has a comparative advantage in — innovation, technology, entrepreneurship and trade — are likely to be the most efficient."

Some of the sectors leading the national recovery, including automobile manufacturing, aren't big employers in California — another reason the Golden State recovery is lagging behind that of the nation.

"California is coming from a deeper hole," UCLA economist David Shulman said.

Shulman projects the U.S. economy will expand at a 3.8% annual rate this quarter and an average 3% rate per quarter until at least 2013. While employment won't return to peak levels, the economy will add a projected 1.9 million jobs in 2011, 2.6 million in 2012 and 3 million in 2013.

The U.S. economy has started to look more robust, as employers added 192,000 jobs in February, up from 63,000 the month before. The national unemployment rate dropped to 8.9% in February, down from 9% in January. UCLA economists predict the national jobless rate will average 8.9% in 2012, dropping to 8.1% by 2013.

Budget deficits in state and local governments nationwide will continue to dog the labor market as the public sector probably will continue to shed jobs, economists said. Rising commodity prices could force businesses to raise prices and stall hiring. Upheaval in the Middle East and North Africa could continue to put upward pressure on oil prices.

"If we have a bigger crisis and oil goes much higher, it's going to cause some problems," Shulman said. "We're not going to be optimistic then."

alana.semuels@latimes.com

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