California unemployment predicted to stay high until 2016
California’s unemployment rate will remain elevated for the next couple of years, according to a new UCLA forecast, and in some parts of the state won’t return to pre-recession levels until 2016.
Still, the state’s labor market is on the mend and is likely to heal faster than the nation as a whole, economists at the UCLA Anderson Forecast said Wednesday.
California’s jobless rate, which was 10.9% last month, is expected to fall to 7.7% by the end of 2014, just slightly above the U.S. average, the forecast said. Growth in the San Francisco Bay Area continues to outpace the nation, led by the technology sector. Even hard-hit areas such as the Central Valley and the Inland Empire are seeing job gains.
In contrast to other parts of the country, California’s labor force is growing, fed largely by workers who are encouraged by their employment prospects, said Jerry Nickelsburg, a senior economist at UCLA Anderson. That is keeping the state’s unemployment rate high even as the employers are adding jobs.
“Labor markets are not as bad in California as the unemployment rate … would suggest,” Nickelsburg wrote in the report.
“If you look at other states, like Michigan, Illinois and Wisconsin, people are … still leaving the labor force,” he said. “It’s not what we find in California.”
Los Angeles, however, remains a weak spot. Its unemployment rate was 11.8% last month, and its labor market isn’t expected to fully recover until 2016. The city’s budget woes are part of the problem as government hiring remains weak. Jobs in the financial sector have yet to bounce back, largely because of the housing meltdown.
But the city’s workforce is a factor as well. About 13% of Los Angeles residents have less than a ninth-grade education, giving L.A. the largest share of uneducated workers among the 31 metropolitan areas examined by the UCLA researchers. That’s hurting L.A. in a global economy where workers increasingly need specialized skills to stay employed.
The holdup in Los Angeles is the sizable low-skill job sector, Nickelsburg said. That includes hospitality, retail and construction, which shed thousands of jobs during the housing bust and drop in consumer spending during the recession.
The Anderson forecast also predicts that the nationwide recovery will be slow and steady.
A warm winter has helped U.S. households this year by slashing heating bills and giving consumers more money to spend at the mall. Sectors such as construction have also been less hampered by snow and cold.
Still, the forecast calls for muted economic growth in the next few years, with annual average U.S. unemployment expected to remain above 8% this year and next.