Explaining Southern California's economy

Today's California economy, brought to you be the letter 'L'

The UCLA Anderson Forecast is out for the third quarter of 2011 and through 2013. The story for the country as a whole is an "L" shaped recovery from the Great Recession — which basically feels like no recovery at all. For California, the story is the same — except that the eventual recovery will probably be even more sluggish

The national economy is limping along at near-stall-speed: barely growing, with a prediction for 0.9 percent GDP growth through early 2012; and creating jobs at far to low a rate to lower the employment rate below it's current 9.1 percent. In fact, the Anderson Forecast is predicting unemployment will go up in the short term, to 9.5 percent, before falling to a still-mortifying 8.6 through 2013.

You look at those numbers say "Oh, man, what are we gonna do?" Then you look at the California outlook and you get really depressed. Our growth rate is at 0.7 percent, and our unemployment rate stays in double-digits until 2014. Plus, the state is beginning to split into two distinct economic geographies, with the coastal regions mounting a modest recovery while the inland regions go from stall to, potentially, stagnation.

Look, we'd be nuts to expect a lot of cheerfulness from economists whose job it is to correctly assess our current malaise and give us a sense of how long it's actually going to take to get out of it. But UCLA is trying! The Anderson Forecast says we're unlikely to fall into a new recession (hence the big "L"-shaped recovery, rather than the dreaded "W"-shaped double-dip), mainly because the sectors of the economy that would tip us over the edge, consumer durable goods like cars and washing machines, have — Wait for it! — hit bottom and can't go significantly lower. (Actually, auto sales have been improving of late, but are well off their peaks in the mid-2000s.)

One thing that's interesting about the Anderson Forecast is its assessment of its own back yard: Los Angeles. Economist Jerry Nickelsburg calls LA a "special case by itself" — a mashup of inland and coastal economic trends. LA benefits from the coastal "knowledge economy," but suffers from exposure to the housing-construction downturn and to aspects of the embattled manufacturing sector. So the Bay Area offers a neat formula for future growth, the Inland Empire might as well be in another state, and the LA…is too weirdly patched together to fully join in the stall or the stagnation.

Chart: UCLA Anderson Forecast

Follow Matthew DeBord and the DeBord Report on Twitter.

blog comments powered by Disqus