UCLA Forecast Sees Worsening Woes

The California economy is losing jobs rapidly with no end to the bleeding in sight.

“California is in for a rough ride in 2009,” wrote Jerry Nickelsburg, a senior economist at the UCLA Anderson Forecast, one of the state’s leading economic forecasting outfits. “We are due for significant increases in unemployment through the second quarter of 2010.”

California’s unemployment rate surged to 10.5% in February, up from 6.2% a year earlier and more than 2 percentage points higher than the 8.1% national rate, according to the California Employment Development Department. The state lost 116,000 jobs during February.

Nickelsburg forecast that payrolls in the nation’s biggest state will shrink by 2.6% this year and 0.6% in 2010. The jobless rate will continue to rise, peaking at 11.9% in the second quarter of 2010, the report said.

The Anderson Forecast — which is used by many local governments and state agencies to predict revenues — said the unemployment rate will slowly decline as economic growth returns in 2010 and 2011, but the jobless rate will remain in double digits through 2011.

“The stalled California economy is simply not producing the jobs required for the new entrants to the labor force over the next couple of years,” Nickelsburg wrote.

The forecast is predicated on the success of the federal government’s efforts to solve the nation’s banking crisis and to get credit flowing. He said the recently approved federal fiscal stimulus plan will help lessen the blow of the sharp economic contraction, but the benefits will largely be offset by state and local tax hikes and spending cuts.

Nickelsburg said the only bright spots in his forecast are that the housing market and retail sales have fallen so far that he doesn’t expect them to fall much further.

Inflation-adjusted home prices have fallen back in line with their long-term averages, he said. But buyers are still hesitant to return to the market, which has made him reluctant to call a bottom to the housing collapse. Nicklesburg forecast that home sales will remain depressed through the end of the year.

“Until buyers have a good idea that they are looking at the bottom, or something sufficiently close, they are going to be tempted to stay on the sideline,” he said.

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