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    California Double Digit Unemployment Will Last Through 2013

    Jan 24, 2011

    The sluggish recovery will keep California's unemployment rate above 10% for three more years according to the Business Forecasting Center at the University of the Pacific.  Federal tax cuts and stronger consumer spending have given a slight boost to the 2011 outlook, but the long-range view is largely unchanged from recent forecasts. 

    Most of Northern California will continue to lag behind the state in 2011.  The slumbering homebuilding industry remains a major impediment to the recovery.  Multi-family housing is rebounding along the coast, but single-family starts will struggle to reach 30,000 statewide in 2011.  Pent-up demand and less-expensive designs will increase new home starts in 2012 and beyond, but will generate less economic activity per unit than in the past.

    In the Central Valley, which is disproportionately impacted by continued weakness in construction and state budget cuts, unemployment rates in 2011 will slightly exceed 2010 levels despite being in the second year of recovery.  Sacramento has experienced the largest job loss in the state over the past 12 months, and we anticipate the capital region will also have the weakest growth in California during 2011. 

    San Jose continues to be the only area in Northern California that is clearly recovering, although Silicon Valley's growth slowed in the second half of 2010.  The San Francisco economy was the biggest disappointment in 2010.  Finance and Professional Service jobs are still sliding in San Francisco while they have begun to recover in most of the nation's other financial and technology centers.  The East Bay will finally regain momentum in 2011 after losing a staggering 11.4% of its jobs over the past 3 years.

    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

      

     

    2010

    2011

    2012

    2013

    2014

    Real Gross State Product (% change)

    2.8

    2.7

    2.9

    2.6

    3.0

    Non-Farm Payroll Employment (% change)

    -1.5

    1.0

    1.9

    2.1

    1.9

    Unemployment Rate (%)

    12.4

    12.0

    11.4

    10.7

    9.6

     

    Central Valley Metro Forecast Summary

     

    Metro Area

    Nonfarm Payroll Employment

    Unemployment Rate (%)

     

    (% change)

     

    2010

    2011

    2012

    2013

    2014

    2010

    2011

    2012

    2013

    2014

     

    Sacramento

    -2.9

    -0.3

    2.4

    2.7

    2.5

    12.6

    12.8

    12.3

    11.5

    10.4

     

    Stockton

    -2.1

    -0.1

    2.1

    2.5

    2.8

    17.3

    17.5

    16.9

    16.0

    14.5

     

    Modesto

    -1.7

    0.3

    2.1

    2.2

    2.1

    17.6

    17.5

    16.7

    16.0

    14.8

     

    Merced

    -2.4

    0.5

    1.8

    2.1

    2.1

    19.2

    19.5

    18.9

    17.9

    16.7

     

    Fresno

    -2.4

    0.8

    1.9

    2.3

    2.1

    16.8

    17.2

    16.6

    15.7

    14.3

     

    California

    -1.5

    1.0

    1.9

    2.1

    1.9

    12.4

    12.0

    11.4

    10.7

    9.6

     

    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 Forecast Summary

    Metro Area

    Nonfarm Payroll Employment

    Unemployment Rate (%)

     

    (% change)

     

    2010

    2011

    2012

    2013

    2014

    2010

    2011

    2012

    2013

    2014

     

    San Francisco

    -2.8

    0.5

    1.9

    1.9

    1.6

    9.4

    9.1

    8.4

    7.6

    6.6

     

    San Jose

    -1.1

    1.5

    2.4

    2.4

    2.0

    11.5

    10.7

    9.9

    9.1

    7.9

     

    Oakland

    -3.0

    0.5

    2.4

    2.4

    2.1

    11.5

    11.5

    10.8

    9.9

    8.6

     

    Santa Cruz

    -2.4

    -0.5

    1.2

    1.6

    1.7

    12.8

    12.7

    11.9

    11.0

    9.9

     

    Vallejo

    -2.4

    0.1

    1.9

    2.3

    2.2

    12.3

    11.9

    11.0

    10.2

    9.2

     

    California

    -1.5

    1.0

    1.9

    2.1

    1.9

    12.4

    12.0

    11.4

    10.7

    9.6

     

    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 January 2011 California Forecast

     

    • California remains in the sluggish, early stages of a long, slow five year recovery. 
    • California unemployment peaked at 12.6% in the first quarter of 2010, and will remain at or above 12% through the first half of 2011, and above 10% through the end of 2013.
    • Payroll jobs bottomed out this summer nearly 1.36 million jobs below their 15.2 million job peak in summer 2007.  California will add 255,000 jobs over the next 12 months; less than one-fifth the total lost.  Jobs will not recover their pre-recession peak until 2015.
    • Despite sluggish job creation, real personal income is expected to near its 2007 peak in 2011, and exceed it in 2012 due to faster growth in non-wage income.
    • After 8 years of zero net job growth from 2007 through 2015, the state's population will have grown by 3 million people, keeping unemployment above 8% in 2015. 
    • Growth in real gross state product will average a modest 2.8% over the next four years.
    • Construction has lost 405,000 jobs since its peak in the winter of 2006, by far the most battered sector through the recession. This cyclical sector will begin growing again, however, adding 20,000 jobs by the end of 2011 and 96,000 additional jobs by the end of 2014.
    • Manufacturing jobs have stabilized after a steep fall.  Next year could bring the first annual increase in California manufacturing employment in a decade.
    • Retail jobs have bottomed out after declining more than 10%, and will recover at a slow 1% rate over the next 5 years.  Leisure and Hospitality jobs will recover at a similar slow rate, but declined less severely in the recession.
    • Professional and Scientific Service jobs are projected to increase by 37,900 (3.7%) over the next year after adding only 15,000 jobs in 2010.
    • State and local government employment, including public schools, will shrink slightly over the next year, eliminating 17,500 jobs.
    • Housing starts remained near the record low levels in 2010 with only multi-family starts in coastal regions showing any significant growth.  This will gradually improve with multi-family starts set for a strong rebound in 2011 while the more economically important single-family sector remains depressed.  By 2015, housing starts will rebound to over 150,000 units per year with multi-family making up 35-40% of new units compared to 20-25% a decade earlier.