Explaining Southern California's economy

UCLA Anderson Forecast: It's getting better in California. Sort of

Los Angeles Mission Holds Annual Job Fair On Skid Row

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Job seekers attend an orientation meeting inside the church during Los Angeles Mission's 11th annual Skid Row Career Fair. The UCLA Anderson Forecast doesn't see the employment situation for big parts of the state's labor force improving for another year.

I normally dig pretty deeply into the economic forecasts that are put out by business schools at places like UCLA and Cal State Fullerton, but this time around the UCLA Anderson Forecast for the second quarter of 2012, I'm going to take a more topline approach. I'm going to chop things up into several posts.

Anderson Forecast Director Ed Leamer noted in his national overview that the U.S. is undergoing some big structural changes. We're shifting from an industrial to a post-industrial world. That means any job that can be outsourced, done by a robot, or accomplished by a microprocessor will be. We can't expect the U.S. economy to provide jobs for under-educated workers any longer. Two bubbles — dot.com and housing — masked our weaknesses.

But things are going to be different in the future. We need to adjust. But it's going to take time. And we shouldn't expect a lot of growth now or in the immediate future. The Anderson Forecast team is predicting 2.4 percent national GDP growth by the end of 2013, which is pretty modest. But we were at 1.9 percent in the first quarter of 2012, after doing 3 percent in the fourth quarter of 2012 but only 1.7 percent on average for the year. 

We'd like to 5-6 percent growth coming out of a recession. 

The Anderson GDP number rises to 3.4 percent by 2014, but that's a long time to wait. 

It's what I've called stuckflation: sluggish growth, high unemployment, and relatively low inflation. 

What about unemployment? It's at 8.2 percent nationally. Anderson sees it falling only to 7.7 percent next year.

In California, we're actually adding jobs at a faster clip than the rest of the nation, especially in the high-tech regions, like the Bay Area, where Anderson economist Jerry Nickelsburg pointed out that employment is growing at two or two and half times the national average. 

BUT we have way too many unemployed construction workers. During the boom years, we had a million workers in this sector, but we only needed 750,000. "We aren't going to have demand for a million anymore," Nickelsburg said. "So what do we do? We have to get them into jobs that are growing."

The employment divide between workers with and workers without education has split California in half — literally. The distinction is no longer north versus south, it's east versus west — coastal California moving forward, inland California lagging behind. 

That said, Nickelsburg said the California's transition from a spending to a saving economy is underway. It's just that with unemployment at 10.8 percent, it's going to take a lot more time to see the positive economics effects. Anderson doesn't foresee it dropping below 8 percent until 2014. 

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