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    CALIFORNIA AND METRO FORECAST: July 2010

    Jul 15, 2010

    Gradual improvement in private sector hiring will prevent a double-dip recession in California according to the Business Forecasting Center at the University of the Pacific. While the state will avoid a second round of recession, the recovery is weak and uneven across the state, and the forecast projects it will be a long five years before economic conditions return to normal.

    Consistent with its last several forecasts, the Business Forecasting Center finds California unemployment peaked in the mid 12% range this spring but will remain at or above 12% for all of 2010. The state's private sector job growth averaged a disappointing 7,000 per month this spring, but should gradually improve to 15,000 per month in the second half of the year.

    With the exception of San Jose, Southern California is leading the early stages of the state recovery. "San Jose is on track for a strong recovery, but it isn't spilling over to neighboring areas," said Jeff Michael, Director of the Business Forecasting Center.

    The early stages of recovery will be especially slow in the Central Valley which is disproportionately impacted by continued weakness in construction and state budget cuts. "Housing starts continue to disappoint our already dismal expectations," said Jeff Michael.

    Sacramento has the weakest outlook for the next 12 months. Uncertainty is freezing up the Capital economy. "Lawmakers are showing no urgency to resolve the budget, and state workers don't know if their next pay check will be $1,000 or $4,000." Despite the state budget woes, Sacramento will gradually increase jobs over the next year, albeit slower than the rest of the state. As a result, Sacramento unemployment will slightly exceed the state average for 2011, the first time this has occurred in over two decades of consistent data.

    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.