California economic growth slow and steady, governor says

SACRAMENTO -- California’s economy should grow at a slow but steady pace in the budget year that begins July 1, says an economic forecast contained in Gov. Jerry Brown’s revised spending proposal.

The all-important housing market is stronger, and unemployment is falling despite an expanding work force, the report from the Department of Finance said. The annual state unemployment rate, which hit a high of 12.3% in 2010, should decline to 9.4% this year and 8.6% in 2014.

Total jobs are expected to reach 2008 pre-recession levels by the end of 2014, while the labor force should expand to 18.77 million in 2014 from 18.21 million in 2008, said the forecast released Tuesday.

Job growth is foreseen in high-wage professional services and in construction, tourism and educational and health services, fueled by the start of the federal Affordable Care health insurance program in January.

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Manufacturing, however remains lackluster, though the high-tech sector continues to be strong. After strong years in 2010 and 2011, exports are expected to continue a slow-down that started in 2012.

Lingering uncertainty about future growth could cause individuals and businesses to hold back on spending, the Department of Finance report cautioned.

As an incentive, Brown is proposing to revamp the state’s Enterprise Zone program, which provided tax credits to companies hiring people in specified localities.

The current Enterprise Zone system “fails to encourage the creation of new jobs and instead rewards moving jobs from one place to another within the state,” the report said.

The much-criticized tax break would be turned into a statewide sales tax credit for firms that buy manufacturing or biotech research and development equipment.

Brown’s plan won instant praise from the California Manufacturers & Technology Assn., which has been advocating for years for such a tax incentive.

“This will make California a more competitive place to scale up production,” said President Jack Stewart.

The governor also called for creation of a California Competes Recruitment and Retention Fund that would negotiate tax break agreements with companies that invest in California and hire more people here.

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