California economic reports forecast modest growth
Things are looking up for California’s beleaguered economy as the recovery from the recession hits a period of slow, modest growth this year and next, according to two economic reports.
Over the next two years, the state is poised to add nearly half a million jobs and drive the current 11.1% unemployment rate down to nearly 10%, the Los Angeles County Economic Development Corp. said in an annual forecast scheduled to be released Wednesday.
And on Tuesday, financial rating company Standard & Poor’s upgraded its outlook on California’s ability to repay its debts to “positive” from “stable.”
“We think the state is poised for credit improvement — and potentially a higher rating,” S&P said.
An upgrade in the state’s credit rating would be “a powerful vote of confidence,” Gov. Jerry Brown said.
California’s improved financial condition, however, is based partly on continued budget cutting, which has fallen heavily on government jobs and services. The state lost 85,500 local, state and federal government jobs since the start of the recession in December 2007.
For Los Angeles County, the recovery is expected to come at “a painfully slow pace,” taking years to make up about 300,000 private-sector and government jobs lost since the start of the recession, according to the forecast.
Governments in the county are expected to shed 3,200 jobs this year, according to the economic development company, a nonprofit that does economic research and promotes local business growth.
In the private sector, the construction industry is expected to drop 3,300 jobs this year. But the losses in government and construction jobs should be offset by bigger gains in other industries, giving the county a net of 15,600 new jobs this year, the report said.
The biggest gains in the county should be in health services, with 5,400 net new jobs; education, with 4,800; information, including television and film production, with 4,100; and leisure and hospitality, with 3,900.
International trade through the ports of Los Angeles and Long Beach and Los Angeles International Airport jumped late last year and is ready to expand along with the national economy. But that projection would hold true only if there were no international political or economic crisis in Europe, the Middle East or elsewhere, the report said.
Barring an international meltdown, the job picture for Los Angeles County should brighten next year with the creation of about 22,700 jobs. The county created more than 10 times that many jobs in 2006, the year before the recession started.
“Los Angeles County seems to be moving, but it’s improving at a slower pace than the state as a whole and the rest of the nation as a whole,” said the principal author of the report and chief economist at the development company, Robert Kleinhenz.
This year, the country’s economy should grow 1.1% and the state’s 1.5%, while Los Angeles County’s growth is forecast to be only 0.6%, he said.
Orange County, the first in Southern California to return to economic growth, in 2010, will lead the transition from recovery to a slow, steady expansion, fostered by its universities, high-tech industries and tourist attractions, the report said.
Residential real estate in Orange County, particularly for lower-priced condominiums, could begin to turn around, “with prices bottoming out and a small upswing in sales and new home construction,” the report said.
The distressed Inland Empire of San Bernardino and Riverside counties showed its first signs of weak growth in the last four months of 2011 but still is hampered by a large number of foreclosures, falling home values and joblessness projected to remain at above 12% this year.
Home construction could take years to revive in the Inland Empire. But in the meantime, an uptick in imports fueled by a boost in retail sales could bring more jobs to the burgeoning warehouses, logistics operations and distribution centers there.
“For the Inland Empire, patience will continue to be the watchword, as the region is not expected to see the pre-recession glory days for at least two to three years,” the report said.
Ventura County, with its mix of high-value agricultural crops and high-tech industries, should lag behind the rest of the state in getting back on its feet. Residential real estate will be a drag for at least the next few years, the report said.
“We’re moving at such a slow pace that, at times, it looks like we’re not gaining any ground,” Kleinhenz said. “But if we look back at the end of the year, we’ll see that the economy has improved.”