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    Eberhardt Business Forecasting Center: NUMMI Shut-Down Marks the End of Northern California’s Recession

    Apr 21, 2010

    California's two year recession ended in the fall of 2009, but most of Northern California is lagging behind the state's recovery according to the Business Forecasting Center at the University of the Pacific. 

     

    The forecast finds that California unemployment is currently peaking at 12.6%, but will remain at or above 12% for all of 2010 as renewed job growth will be largely offset by increased job seekers in the second half of the year. 

     

    Only the technology-centered San Jose area has shown signs of renewed growth comparable to Southern California in the first quarter of 2010.  San Francisco will soon join San Jose in posting a strong comeback in the second half of the year.  The recovery for the rest of Northern California begins this spring, but will be slower to develop.  It will take four to five years for normal economic conditions to return to most areas. 

     

    "The NUMMI closure clearly marks the bottom of the trough for the East Bay and Northern San Joaquin Valley," said Jeff Michael, Director of the Business Forecasting Center. 

     

    Although NUMMI is the largest blow, the forecast notes that the East Bay has been at the forefront of Northern California's economic woes since the early stages of the recession.  Construction, sub-prime mortgage lenders, retail bankruptcies, declining port traffic, and higher education cuts have all hit the East Bay hard in advance of the Toyota shut-down. 

     

    "Of the 10 metro areas we track, the East Bay is the only area that has lost more than 10% of its jobs, and that is before the NUMMI shut-down," said Jeff Michael.  "Many of these jobs were held by Northern San Joaquin Valley commuters, contributing to the foreclosure and construction crisis that has driven unemployment over 18% from Stockton to Merced."  

     

    The Business Forecasting Center at the University of the Pacific was founded in 2004. Housed in the Eberhardt School of Business, the Center produces quarterly economic forecasts of California and 10 metropolitan areas in Northern and Central California.  The Eberhardt School of Business is one of a handful of Business schools producing comprehensive quarterly forecasts of the California economy, and includes several regions not covered by other forecasts. In addition to the Quarterly Forecasts, the Center produces in depth studies of regional issues, and offers custom economic research services to public and private sector clients. 

     

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    California Annual Forecast Summary

      

    2008

    2009

    2010

    2011

    2012

    Real Gross State Product (% change)

    0.4

    -2.9

    2.9

    3.1

    3.3

    Non-Farm Payroll Employment (% change)

    -1.3

    -6.0

    -1.3

    2.0

    2.8

    Unemployment Rate (%)

    7.2

    11.4

    12.3

    10.9

    9.7

     

    Central Valley Metro Forecast Summary

     

    Metro Area

    Nonfarm Payroll Employment

    Unemployment Rate (%)

     

    (% change)

     

    2008

    2009

    2010

    2011

    2012

    2008

    2009

    2010

    2011

    2012

     

    Sacramento

    -2.3

    -5.5

    -1.9

    1.9

    3.2

    7.1

    11.6

    12.4

    10.9

    9.7

     

    Stockton

    -2.7

    -5.7

    -0.9

    1.7

    2.9

    10.5

    16.0

    17.3

    15.3

    13.5

     

    Modesto

    -2.3

    -6.1

    -1.7

    1.8

    2.7

    11.2

    16.6

    18.0

    15.8

    13.7

     

    Merced

    -1.9

    -5.0

    -1.3

    1.8

    3.2

    12.8

    18.1

    19.4

    17.4

    15.6

     

    Fresno

    -1.1

    -5.4

    -1.1

    1.8

    2.9

    10.6

    15.7

    16.6

    15.0

    13.3

     

    California

    -1.3

    -6.0

    -1.3

    2.0

    2.8

    7.2

    11.4

    12.3

    10.9

    9.7

     

    Sacramento MSA includes Sacramento, El Dorado, Placer, and Yolo counties.  Stockton, Merced, Fresno and Modesto MSAs correspond to San Joaquin, Merced, Fresno and Stanislaus counties.

     

    Bay Area Metro Forecast Summary

    Metro Area

    Nonfarm Payroll Employment

    Unemployment Rate (%)

     

    (% change)

     

    2008

    2009

    2010

    2011

    2012

    2008

    2009

    2010

    2011

    2012

     

    San Francisco

    0.8

    -5.4

    -1.4

    2.4

    2.6

    5.0

    8.8

    9.4

    8.1

    7.1

     

    San Jose

    0.4

    -6.4

    -1.0

    2.6

    3.0

    6.1

    11.4

    11.7

    10.2

    9.1

     

    Oakland

    -1.7

    -6.2

    -2.5

    2.0

    2.9

    6.2

    10.8

    11.8

    10.6

    9.3

     

    Santa Cruz

    -2.9

    -4.8

    -1.9

    1.6

    2.7

    7.4

    11.9

    12.7

    11.2

    9.8

     

    Vallejo

    -2.2

    -4.4

    -2.1

    2.1

    3.9

    6.9

    11.3

    12.2

    10.6

    9.2

     

    California

    -1.3

    -6.0

    -1.3

    2.0

    2.8

    7.2

    11.4

    12.3

    10.9

    9.7

     

    San Francisco MSA includes San Francisco, Marin and San Mateo counties.  Oakland MSA includes Contra Costa and Alameda counties.  San Jose MSA includes Santa Clara and San Benito counties.  Vallejo and Santa Cruz MSAs correspond to Solano and Santa Cruz counties.

     

     

     


    Highlights of the April 2010 Forecast

     

    • California's recession ended in late 2009.  The state is in the early stages of a slow five year recovery back to more normal economic conditions.

     

    •·         California unemployment is currently peaking at 12.6%, and will remain above 12% through the end of 2010, and above 10% through all of 2011.

     

    • Payroll jobs bottomed out this winter nearly 1.4 million jobs below their 15.2 million job peak in Summer 2007. 

     

    • It will take more than 4 years for jobs to recover the 9% decline.  During the seven years of zero net job growth from 2007 to 2014, the state's population will have grown by 2.5 million people keeping unemployment above 8% through most of 2014.

     

    • Growth in real gross state product will average a modest 3% over the next four years.

     

    • Construction has lost 400,000 jobs, by far the worst sector through the recession.  This cyclical sector will eventually bounce back, and should experience more than 10% job growth in 2012 and 2013.

     

    • With the notable exception of the NUMMI closure, manufacturing is leading the early stages of the recovery.  Next year could bring the first annual increase in California manufacturing employment in a decade.

     

    • Construction continues to lead job losses in percentage terms, declining another 12% (78,000) by the middle of 2010. 

      

    • Retail jobs have bottomed out after a more than 10% decline, but will remain flat over the next year.

     

    • Professional and Scientific Services did not start losing jobs until the second half of the recession, but these critical, high-paying areas declined rapidly in 2009.  We expect strong growth in this area as the recovery gains strength in late 2010 and 2011.

     

    • State and local governments, including public schools, will drive most remaining job loss as the private sector slowly recovers.

     

    • Housing starts bottomed in 2009 at a record low 37,000 units.  Although housing starts will recover to 56,000 units in 2010, this is still the 2nd lowest level in 50 years.  By 2013, housing starts will be back to normal levels exceeding 150,000 units as foreclosures finally ebb and existing home prices recover to close the gap with construction costs.

     

    • Retail sales are growing again, but will not recover their 2007 level until 2011.