UCLA Forecast Shows Unexpected Job Boost in California

LOS ANGELES — An unexpected spike in California job creation numbers has the UCLA Anderson Forecast’s economists speculating that the state may have turned a corner on its economic malaise.

Based on economic indicators that include export figures and transportation surveys, the economists had forecast in September that the state would produce zero job growth through the end of the year, but California led the nation in job growth in September and October, adding 176,000 jobs, said Jerry Nickelsburg, a UCLA Anderson Forecast senior economist, in an interview.

 “When you have very high unemployment, as you do in parts of California, people start creating their own jobs,” Nickelsburg said. “California is a very entrepreneurial state.”

Like forecasts of the past several years, this one is tempered, as economists don’t anticipate California’s unemployment rate will drop below double digits until 2014. If the state continued to add jobs through 2012 as it has the past two months, the state would return to pre-recession job levels. However, that is not likely, Nickelsburg said.

“A weak national and international outlook does not argue for the return of the recovery to be a robust return,” Nickelsburg said in the report. “What is important, however, is that the last two months have yielded both job growth in excess of the U.S. rate and job growth which is widespread throughout the state.”

The state’s unemployment rate dropped to 11.7% from 12.1% while the national unemployment rate has only fallen by 0.1%, according to the forecast. Despite the improvement, California’s unemployment is still 2.7% higher than the national rate of 9%.

The Anderson economists said in September that the economy had stalled as private-sector job growth in California ground to a halt in March, and had been basically nonexistent through August. The job growth in September and October evinced a return to the recovery levels of 2010 in private-sector job growth, however, their report said.

The sectors that have been growing over the last four months are professional and business services, leisure and hospitality, health care, education, information, durable goods, and manufacturing, which is dominated by computers and electronics.

“California’s tech industry has really started to hire,” Nickelsburg said. “Maybe they are feeling more confident about the future.”

The public sector hasn’t experienced the same gains, however. The government, construction, retail, and finance sectors continue to be weak, Nickelsburg said.

Though the Anderson forecast does not include a general fund revenue forecast for the state, it does include a forecast on taxable sales based on consumption. Nickelsburg said Anderson is predicting weak growth in that area.

The economists expect more state and local government workers will be laid off in 2012 since state and local finances are so intertwined, Nickelsburg said.

On a brighter note, the steps state legislators have been taking to put California on a sounder fiscal course are expected to enable government to grow a little bit by 2013.

 “For the first time in several years, the state passed a budget that was more or less passed on time and was balanced,” Nickelsburg said. “In addition, there was a recognition that forecast revenues are not reality and trigger cuts were added in case revenues did not come to pass. That was a pretty big change from the past decade.”

A double dip is not predicted for California, but the forecast said that the state’s European trading partners could be facing one. If the mild recession anticipated for Europe next year becomes a reality, it will have little impact on California, however, Nickelsburg said.

“But if what happens in Europe is a massive dislocation, that might impact the U.S. and by implication, California,” Nickelsburg said. “If Europe falls apart and there is a banking crisis, then all bets are off.”

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