Golden State’s Economy Will Shine, Predict UCLA Analysts

Substantially upgrading their projections for California’s resurging economy, UCLA forecasters now believe that the state’s jobless rate will drop below the nation’s by 2000 and that California’s home values and net in-migration will rise faster than previously thought.

In their quarterly report to be released today, economists at the UCLA-Anderson Forecast Project say California’s unemployment rate, estimated to average 6.2% this year, will rise slightly in 1998 because of an expected slowdown in the national economy. But the state’s jobless figure will fall to 5.9% in 1999 and dip further to 5.5% the next year, lower than the U.S. rate of 5.7% projected for 2000.

For most of the last decade, California’s unemployment rate has been significantly higher than the nation’s as the state underwent a deep and prolonged recession. And UCLA forecasters previously had not expected California to match the national rate this decade. The university’s earlier report in June forecast California’s unemployment rate to be 7.1% in 1998 and 6.7% in 1999--significantly higher than the new projections.

But Tom Lieser, associate director of the forecasting group, said economists revised California’s projections based on the state’s robust employment growth this year.

Behind a continuing national economic expansion and strong growth especially in entertainment, high-technology manufacturing and service industries, California is on pace to add more than 400,000 jobs this year.

Consumer confidence in the Pacific region this summer reached its highest in six years, and the latest state data show Californians are enjoying large income gains, partly because of low inflation and a buoyant stock market.

“We feel more optimistic this time,” Lieser said.

That California’s jobless figure is close to or even below the nation’s is significant because that affects the migration of people in and out of the state.

Although California has long been a magnet for both domestic and foreign migration, from 1990 to 1995 about 1.5 million Californians moved out, while 705,000 residents of other states moved in. During that period, an additional 700,000 immigrants arrived in California. That resulted in an overall net in-migration of minus-95,000 during that five-year period.

But with California’s economy glittering again, UCLA forecasters expect the state’s net in-migration to total 25,000 this year--up from negative-16,000 last year--and to climb appreciably in the following years until it reaches 200,000 in 2000--more than double the number previously projected by UCLA.

Beyond 2000, California’s population will continue to grow, with net in-migration averaging in the mid-200,000 level until the year 2020, according to UCLA forecasters.

“The beginning point for this long-run projection, in mid-1997, is virtually a turning point for California demographic trends,” said UCLA’s report, titled “The Moving Vans Are Heading West Again.”

Yet immigration will account for most of the net population growth, said UCLA demographer Nancy Bolton, who adjusted UCLA’s forecast after considering new data from the U.S. Census Bureau and the state Department of Finance, which both predicted strong population growth for California. UCLA’s net in-migration projections are somewhat rosier than the Census Bureau’s, Bolton said.

UCLA’s quarterly report, which is closely followed by business and government, also provided good news for homeowners in Los Angeles County. The economists predicted values for a typical house in the county to continue to rise, to 4.9% on average in 1998 and 5.2% in 1999.

However, UCLA analysts said they did not expect a big increase in residential building through 2000, which will create an even tighter supply of housing to accommodate the growing population, and thus likely leading to a sharp hike in rents.

UCLA’s latest forecast on growth of nonfarm payroll remained essentially the same. Analysts estimated that nonfarm employment growth in the state will hit 3.5% this year, slip to 2.5% in 1998 because of an expected hike in interest rates, and then bounce back up to 2.9% in 1999 and 3.1% in 2000. By comparison, they expected the rate of nonfarm job growth for all of the U.S. to reach 1.9% in 1998, then slow to 1.1% in 1999 and 1.2% in 2000.

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Bright Outlook

UCLA economists forecast a sunny picture for California: a significantly lower unemployment rate, a sharper increase in home values and much higher net in-migration from other states.

Unemployment rate:

2000: 5.5%

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Home values: Change in value from previous year for typical home in L.A. County.

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Net in-migration

2000: 200,000

Source: UCLA-Anderson Forecast Project