Business & Economy

UCLA economic forecast says unemployment will stay high, but no recession

California's unemployment rate will remain high at 12 percent through 2012, according to the UCLA economic forecast released Tuesday. However, the report says that the nation is not about to slide back into recession.

"With the economy in stall mode, the most likely scenario will be a slow build over the next 12 months followed by an incipient recovery period," UCLA Anderson Forecast senior economist Jerry Nickelsburg wrote in his report.

This means a slight increase in California's unemployment rate over the next two quarters, "followed by a slow trajectory towards, but not reaching, single-digit unemployment the following five quarters," according to Nickelsburg.

The report says there will be virtually no employment growth in the state for the balance of the year, with growth of 0.7 percent expected next year and 2.1 percent in 2013. Overall, the state's unemployment rate will hover around 12 percent through 2012, Nickelsburg concluded.

"Unemployment will fall through 2013, the last year of our forecast, and will average approximately 11 percent," he wrote. "Employment growth in 2011 and 2012 will push unemployment down marginally, and therefore, we do not expect it to reach single digits until 2014."

The economy will remain particularly sluggish in inland California areas, with high unemployment expected to extend into 2017, Nickelsburg reported. Coastal communities have experienced an economic recovery that has outpaced the rest of the nation, and that could continue thanks to the skilled-labor market and advanced manufacturing.

The problem, according to Nickelsburg, is that there apparently will not be any spillover of the positive coastal-area economic news into the inland community, meaning a widening gap between inland and coastal areas.

"There exists a possibility of negative population growth in Inland California," Nickelsburg wrote. "It is difficult to quantify the likelihood of such an event and we are not forecasting one to occur, but it is not outrageous to consider it. Indeed, it is important for policy makers to keep this in mind as they plan for two very different Californias.

"... Averaged together, these two Californias -- a contracting (inland area) and expanding (coastal area) -- will generate muted economic growth through the first three quarters of 2012, growth that will be sub-par when compared to the rest of the country."

In its assessment of the national economy, the Anderson Forecast found the outlook "far worse" than it was just three months ago. Given the economy's weak performance in the first half of the year, the forecast projected average Gross Domestic Product growth of just 0.9 percent per quarter on average through the first quarter of 2012.

"However, the Forecast economists remain steadfast in their assertion that the United States is not currently in a recession, nor is there a recession in the forecast through 2013," according to a statement accompanying today's forecast.