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California economy gaining momentum, Wells Fargo report says

August 21, 2012|By Ricardo Lopez
  • A Wells Fargo report released this week said the state's economy is expected to gain momentum in the second half of the year, but challenges loom. Above, a recruiter hands paperwork to a job seeker at an employment fair Monday in San Diego.
A Wells Fargo report released this week said the state's economy is… (Sam Hodgson / Bloomberg )

Following Friday's job report showing that California payrolls have grown 2.6% in the last year -- faster than the U.S. -- a report by Wells Fargo released this week forecasts faster growth through the second half of the year.

The state's job growth has been led largely by the Bay Area and Silicon Valley, where tech giants such as Google Inc., Apple Inc. and Facebook Inc., have added thousand of jobs and billions of wealth to the state's economy.

But citing an apparent turnaround in housing and construction, senior economist Mark Vitner wrote that improvements in these sectors signal a more broad-based recovery with job growth in construction and the financial activities sectors.

"The progress made to date probably surprises many people who have been mesmerized by all the headlines surrounding municipal bankruptcies and the seemingly never-ending state budget battles, but California's economic recovery has made significant strides," Vitner wrote.

On Friday, the state's Employment Development Department reported that California employers added a net total 25,200 jobs in July, the third straight month of solid job growth. Since May, a net 116,100 jobs have been added to payrolls.

The unemployment rate, however, remains at 10.7%, the third highest in the country. It has fallen by 1.2 percentage points in the last year.

Though California has recently begun outpacing the U.S. in job growth, there are weaknesses, Vitner found.

A slowing global economy is affecting trade activity at California ports. Though export growth remains positive, it has slowed to its lowest rate since 2009. Trade, however, has been buoyed by exports to Mexico, the state's largest market.

Additionally, state and local governments continue wrangling with ravished budgets as tax revenues came in lower than projected in fiscal year 2012. The government sector has continued shedding jobs through the recovery.

The report forecast employment to rise 2.2% in 2012 and pick up to 2.5% in 2013.

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ricardo.lopez2@latimes.com

Follow Ricardo Lopez on Twitter.

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