Explaining Southern California's economy

California's economy is headed in the right direction, but recovery will be slow

Los Angeles skyline

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Los Angeles should start to catch up on its economic recovery in 2012 and 2013, according to LAEDC economists.

The Kyser Center for Economic Development, part of the Los Angeles Economic Development Corp. (LAEDC), has just released its 2012-13 mid-year forecast for the nation, the state, and various metropolitan regions in the Southern California. The data contained in the report is considerable, so I'm going to focus on the national and regional picture in this post, with an emphasis on Los Angeles County.

The Kyser economists aren't predicting a recession in 2012 or 2013. But they do anticipate sluggish, subpar growth: 2 percent GDP growth in the U.S. for this year, and only 2.2 percent growth for next year. They don't see the unemployment rate falling nationally by much over the next two years. It's currently at 8.3 percent — and by the end of next year, it will be at 8 percent.

There's a very big however in all this fairly grim prognostication: inflation should remain low for the 2012-13 period. This means that we're not seeing a repeat of the dreaded "stagflation" of the 1970s, when we had weak growth, high unemployment, and prices rising through the ceiling. What's happening now is different: the economy is wading through muck and mire, struggling to make any gains, and people have become so frustrated with the job market that they're dropping out completely, possibly never to return. I call this this "stuckflation." This is an economy that isn't tipping into recession, but that can't gain any momentum.

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