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    California and Metro Forecast January 2010: NUMMI Shut Down, Housing Crisis, and State Budget Woes Delay End of Recession Over Much of Northern California

    Jan 6, 2010

    California’s two year recession ended in the 4th quarter of 2009 - lagging several months behind the U.S. - according to the Business Forecasting Center at the University of the Pacific. Southern California will lead the early stages of a sluggish recovery as many areas of Northern California will not emerge from recession until the spring or summer of 2010.

    “Although the recession is technically over, it will feel like a recession in California for another year,” said Jeff Michael, Director of the Business Forecasting Center. “The state’s unemployment rate will stay above 12% for most of 2010.”

    Looming over the recovery in Northern California is the April 1, 2010 closing of the NUMMI plant in Fremont, which manufactures cars and trucks for Toyota. The closure will be the largest mass layoff event of California’s recession so far, and the ripple effects will have large impacts on the Northern San Joaquin Valley in addition to the East Bay.

    “It’s hard to say the recession is over in this region until NUMMI is closed,” said Jeff Michael.

    When NUMMI is combined with foreclosures, the construction depression, and a new round of state budget cuts, the recession will continue through the first half of 2010 for the Northern San Joaquin Valley, Sacramento, and portions of the East Bay. While the entire state faces housing and state and local budget challenges, the impacts are most severe in these regions.

    The best near term prospects are in San Francisco, San Jose and Fresno. These three metro areas have fewer problems in the housing market, and lower exposure to the state budget crisis and NUMMI. They should benefit from modest improvements in the technology, agriculture, and tourism sectors compared to 2009. Although these areas will start recovering sooner than their neighbors, they will follow the statewide pattern of modest growth and stubbornly high unemployment.

    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 9 metropolitan areas from Sacramento to Fresno and the San Francisco Bay Area. 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 in California's Central Valley 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.