California's economy in 2010 predicted to recover slowest in country

Economic growth in California will lag behind the rest of the nation for the rest of 2010 but pick up after that, according to the UCLA economic forecast released today.

California “will grow slower than the U.S., and a slow recovery in jobs will leave unemployment at 12.1 percent for the year,” UCLA Anderson School senior economist Jerry Nickelsburg wrote in the report. “... Even though the state will grow more rapidly in the following two years, job creation will not be fast enough to push the unemployment rate below double-digits until 2012.

“Unlike other deep recessions, the rapidity of the recovery, at least on the employment front, will be muted,” he said. The forecast was slightly weaker than one released in March.

The Greater Los Angeles area should recover faster than the rest of the state, partially because of business moving through the ports. Unemployment, however, is expected to remain in the double digits through 2012.

“The city’s finances remain in distress and the coming layoffs will put a drag on job growth coming from exports, logistics and manufacturing,” UCLA Anderson economist Julia Thornton Snider wrote in a report called “Emerging from Quicksand.”

According to Nickelsburg, the state’s economy will begin to pick up slightly early next year, and return to more normal growth levels by mid-2011.

“The recovery from this recession will be driven by education, health care, exports and technology and to some extent by the growth in residential construction,” Nickelsburg wrote. “The first four are more heavily centered in coastal California and are currently generating net job growth for these sub-regions. The latter will begin to generate jobs along the coast in the near term, but there will be little new activity inland until the housing markets turn.

“Thus, economic growth in California will be bifurcated with an early recovery along the coast coexisting with continued economic doldrums to the east.”

Nickelsburg predicted that the unemployment rate will fall slowly for the balance of this year, ending 2010 with an average of 12.1 percent.