Business & Economy

Forecast: Calif. to outpace nation in job growth

Construction took a big hit during the recession and is recovering slower than other parts of the California economy, according to the latest UCLA Anderson Forecast.
Construction took a big hit during the recession and is recovering slower than other parts of the California economy, according to the latest UCLA Anderson Forecast.
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California will continue to outpace the nation in job growth over the next few years, narrowing an unemployment rate gap in a slow but uneven economic recovery that will leave unskilled workers behind, according to theUCLA Anderson Forecast released Thursday.

The state's unemployment rate will average 8.9 percent this year — compared with 7.6 for the U.S. as a whole — but it will drop by a percentage point in 2014 and another in 2015, forecasters said in their third-quarter report.

The national unemployment rate will remain lower, but California will narrow that gap as it has continued to do for more than a year, the forecast said.

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"The factors which have driven California employment and income growth to higher rates than the U.S. are still in play," it said. "As the world economy improves, and as investment in the U.S. picks up once again, California will once again have a disproportionate share of that improvement."

California's total employment growth — including payroll, farm and the self-employed — will be 2.7 percent this year, and 2.1 percent for each of the next two years, the forecast said.

Real personal income growth will be 1.9 percent this year — beating the U.S. figure of 1.4 percent — and it will surge to 3.3 percent in 2014 and 2015, which is almost equal to the U.S. figure.

California added 80,000 nonfarm jobs between April and July, representing more than 15 percent of the U.S. gain in the category for the period, the report said. For the 12 months that ended in July, California was second only to Utah in the rate of total employment gains, with a 2.8 percent growth rate that was double that of the U.S. as a whole.

However, not everyone in California was benefiting equally. The state's recovery was "divided geographically and divided by skill class," forecasters said.

That division reflects two distinct economies in California, "the coastal economy that was based on knowledge communities, technology innovation, trade; and the inland economy that was more based on growth in residential construction, growth in government and more traditional manufacturing," economist Jerry Nickelsburg told KPCC's Wendy Lee.

Nickelsburg, one of the economists who worked on the 2013 UCLA Anderson Forecast, said coastal areas like Orange County and San Diego are leading the state to a healthier economy. But even though the state's unemployment rate is expected to improve, it won't happen that quickly in the Inland Empire, he said, because construction took a big blow when the recession hit.

"There's about 8 percent of the workforce that was involved in residential construction, whereas in Los Angeles it was below four percent," Nickelsburg said.

"The lower skill dominant sectors and the manual skills sectors (construction and manufacturing) are significantly smaller. Herein lies the fly in the ointment of California's recovery," forecasters said. "Californians who have invested in and developed skills in important sectors of the 20th century economy are finding that some of those same skills are not applicable to economic activity in the 21st century."

The U.S., meanwhile, will add 200,000 jobs per month through 2015, and while the national economy hasn't returned to normal, it's getting there, forecasters said. They predicted the nation's real gross domestic product will grow by 2.5 percent for the rest of the year and will reach the normal rate of 3 percent next year and in 2015.

"But make no mistake ... it still will not be enough to restore the economy back to its pre-recession growth path," the report warned.

There also remain challenges and weaknesses.

"The housing market, while improving, has not taken off as rapidly as we were forecasting, and there remains downside risk of a fragile recovery stumbling," the forecast said.

In the near-term, implementation of the Affordable Care Act could prompt companies to convert full-time workers to part-time and smaller business to curb the number of people they employ to avoid new health insurance coverage requirements, the forecast said.