STOCKTON – A forecast released today projects that economic recovery in California, while far from robust, will continue a slow, steady rate that will outpace the national economy.
The most recent California and Metro Forecast by the Business Forecasting Center at the University of the Pacific in Stockton calls for real gross state product to grow by 2.5 percent in 2012 and 2013, but only by 2 percent for the United States as a whole. California job growth will average 1.8 percent over the next two years compared to 1.5 percent nationally.
The California economy will pick up as construction and real estate rebound.
“Economic growth is forecast to accelerate to 3.5 percent in 2014 and 2015 as housing and construction begin making a positive contribution to the state’s economic growth,” according to the 68-page quarterly report. “Single family housing starts are projected to remain below 30,000 units for a fourth consecutive year in 2012, but are forecast to grow to 38,000 in 2013, accelerate significantly in 2014, and surpass 100,000 units per year in 2016.
“The gradually healing real estate market is evidenced by declining delinquency rates, stabilizing home prices, and declining vacancy rates,” continued the report. “Continued progress in housing is critical as government spending and export growth face contraction or slower growth.”
The unemployment rate fell more quickly than the Business Forecasting Center’s research expected.
“Thus, we now predict the state’s unemployment rate will fall below 10 percent in the second quarter of 2013,” read the report, “an improvement from our previous forecast of double-digit unemployment through the end of 2013.”
The authors, led by center Director Jeffrey Michael, called the recovery “painfully slow” and warned that recovery could be hampered by a variety of factors, from the deepening European recession, reduced exports to Asia, oil price spikes due to tensions in the Middle East, and a variety of political influences here at home.
Despite these factors, there continued to be positive news.
“This continues to be the first year of the recovery for most of the Central Valley with the strongest job recovery in the Stockton area,” read the report. “Modesto and Merced are lagging but will soon get a boost from the development of the Amazon distribution center in Patterson.”
The report’s short-term outlook for the Stockton Metropolitan Statistical Area, which is comprised of San Joaquin County, predicts a 4 percent increase of job growth in 2012 over 2011. Total nonfarm employment started edging up in the second half of 2011 and will continue to strengthen in 2012.
Construction will be key to that growth. The report predicts the construction and mining sector will post 12.5 percent job gains in 2012 and another 6.1 percent in 2013. Manufacturing, professional and business services, and education and health services sectors all will move upward in 2012 and 2013, according to the report.
There will be strong growth of 3.1 percent in 2012, 2.9 percent in 2013, and 3.2 percent in 2014. Unemployment will fall to 15 percent in 2012, 14.6 percent in 2013, and eventually to 11.2 percent in 2016.
The economy in the Modesto Metropolitan Statistical Area – Stanislaus County – will be moderate, but it will continue a slow, steady recovery. Job growth will be about 0.3 percent in 2012 over 2011. It will begin with a small increase in the second quarter 2012 and will increase to a 1.5 percent pace into 2013. Modest increases in the construction and manufacturing (5.4 percent) and manufacturing (2.4 percent) will lead the growth. The jobs growth will pick up to 2.2 percent will all sectors except the federal government adding jobs.
And despite the increased population and labor force, the job growth will reduce the unemployment rate to 14.4 percent in 2013 and 11.9 percent by 2016.
Highlights of the August 2012 forecast
• California continues to experience a sluggish recovery. We forecast the economy will grow an average 2.6% in 2012 and 2.3% in 2013, a very slight improvement from the first two years of recovery when growth in real gross state product averaged less than 2%.
• California unemployment rate has declined to 10.7% and will continue to decline steadily, falling below 9% in 2014 and below 8% in 2015.
• Payroll jobs continue to grow at a steady rate, but the state has still only recovered one of every four jobs lost in the recession. Non-farm employment will recover its pre-recession peak in the fourth quarter of 2015.
• Despite sluggish job creation, real personal income is expected to approach and exceed its 2008 peak in the second quarter of 2012 due to stronger recovery in non-wage income and higher wage industries such as technology.
• After 9 years of zero net job growth from 2007 to 2016, the state’s population will have grown by more than 3.4 million people, keeping unemployment above 7% in 2016.
• 285,000 new Construction jobs are expected to be created over the next four years, about 26% of California’s total non-farm job growth. Despite leading the state in job growth between 2012 and 2016, there will still be nearly 100,000 fewer Construction jobs in 2016 than before the recession.
• The trend of gradual growth in Manufacturing employment is expected to weaken in 2012 with employment growth falling to just 0.1% or 1,600 jobs.
• The Health Services sector was the only private sector to experience consistent job growth throughout the recession, adding 27,500 jobs per year throughout the recession. Strong employment growth will continue in the coming years, adding over 30,000 jobs per year over the next four years.
• Professional Scientific & Technical Services led all industries in job growth in 2011 and will again in 2012 with a stronger 4.1% increase.
• State and local government employment, including public schools, has decreased by more than 131,000 since summer 2007. Government employment will bottom over the next year, and will only increase by 60,000 jobs by the end of 2016.
• Single-family housing starts will begin a slow rebound in 2013, with over 38,000 single-family housing starts and 41,000 multifamily housing starts. By 2016, however, single-family housing starts will surpass 100,000 units, about two-thirds the pre-recession peak.
The Business Forecasting Center at the University of the Pacific was founded in 2004. Housed in the Eberhardt School of Business, the center produces quarterly economic forecasts of California and 10 metropolitan areas in Northern and Central California. In addition to the quarterly forecasts, the center produces in depth studies of regional issues, and offers custom economic research services to public and private sector clients.
Scroll down to download a PDF version of the 68-page report.
