UCLA forecast predicts little to no growth for California economy

According to a forecast released today by UCLA economists, the California economy will continue to show little to no growth heading into 2010, but the national outlook will begin slowly improving over the coming year.

The UCLA Anderson Forecast says that unemployment will continue to rise for the rest of the year, topping out at 12.7 percent. The job outlook is expected to improve in 2011, but not significantly.

"Though the California economy will be growing in 2011, it will not be generating enough jobs to drive the unemployment rate below double digits until 2012," economist Jerry Nickelsburg wrote in the quarterly forecast.

"The stalled California economy is simply not producing the jobs required for the new entrants to the labor force over the next couple of years to prevent these elevated levels of unemployment to persist once the job layoffs cease," he wrote.

At the end of 2009, personal income is expected to show a 2.7 percent decline for the year, but is expected to increase by 0.4 percent in 2010 and 2.8 percent in 2011.

Although the Anderson Forecast paints a slightly rosier picture for the national economy, the stat's continuing budget crisis means an extended reduction in state government spending that will blur California's financial picture.

"The keys to California's recovery remain exports of manufactured and agricultural goods, a recovery in U.S. consumption which increases the demand for Asian imports and for products from California's factories, increased public works construction and increased investment in business and equipment software," Nickelsburg wrote.

On the national front, UCLA economist David Shulman predicted that while the economy is in a "painful period of transition," he believes the next decade will "start from a cyclical trough and end at a peak," beginning with slow growth in the U.S. economy next year.

The national unemployment rate will likely peak at 10.5 percent in the first quarter of 2010, then hover around 10 percent for the rest of the year.

"We hypothesize that one reason for the high rate of unemployment is that business firms who hitherto viewed office overhead costs as fixed now view them as variable," Shulman wrote. "Thus, where in prior recessions much of the marketing, finance, research and administrative employees were generally immune from layoffs, the new management regimes have made those functions vulnerable to severe cutbacks."

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