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CALIFORNIA AND METRO FORECAST: April 2012

May 1, 2012

California remains on the path of slow recovery according to the latest projection from the Business Forecasting Center at the University of the Pacific.  For 2012 and 2013, real gross state product is forecast to grow at an average 2.5% rate for both 2012 and 2013, and jobs will increase at a 1.5% pace.  In 2014 and beyond, the pace of recovery will gradually accelerate as housing and construction begin making a positive contribution to the economy. 

California's unemployment rate is currently 11.0%, and is projected to remain in double digits through the last quarter of 2013.  Housing starts are projected to grow modestly to 54,000 in 2012 with most growth in coastal multi-family construction while single-family homebuilding remains near historic lows. 

The regional outlook predicts that 2012 is the first year of economic recovery in the hard hit Central Valley.  "The Stockton area was one of the hardest hit areas in the nation, but leads the state in job growth over the past 12 months." said Jeff Michael, Director of the Business Forecasting Center.  "The drag from housing has bottomed out, and other mainstay industries such agriculture and transportation are performing well."  Further government spending cuts remain a risk for the Valley recovery, especially in the Sacramento and Fresno areas. 

The Bay Area continues to lead the state's recovery, and the strong recovery in the Silicon Valley has now spread out across the entire Bay and across sectors to include more than just technology.  All parts of the Bay Area are projected to exceed 2% job growth in 2012. 

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.  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.  For more information, visit http://forecast.pacific.edu/  

California Annual Forecast Summary    
  2011 2012 2013 2014 2015 2016
Real Gross State Product (% change) 1.6 2.6 2.5 3.6 3.7 3.2
Non-Farm Payroll Employment (% change) 1.0 1.4 1.5 1.9 2.0 1.7
Unemployment Rate (%) 11.8 10.7 10.2 9.4 8.4 7.7
Housing Starts (thousands) 44.9 53.7 79.5 112.3 147.3 165.2
   
Central Valley Metro Forecast Summary  
Metro Area Nonfarm Payroll Employment Unemployment Rate (%)  
(% change)  
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015  
Sacramento -1 0.9 1.9 2.3 2.6 11.9 11.1 10.3 9.4 8.4  
Stockton -1 4 1.9 2 2.2 16.7 15.2 14.8 13.8 12.7  
Modesto -1.5 0.7 1.7 1.9 1.9 16.7 15.5 15.1 14.1 13.1  
Merced 0.6 0.1 1.6 1.9 2 18.6 17.3 16.6 15.2 13.9  
Fresno 0.2 2 1.7 1.9 2.1 16.6 15.4 15 14 12.8  
California 1 1.4 1.5 1.9 2 11.8 10.7 10.2 9.4 8.4  
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)  
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015  
San Francisco 1.8 2.1 1.5 1.8 1.7 8.3 7.4 6.8 6.1 5.5  
San Jose 2.8 2.8 2 2.3 2.5 10 8.7 8.1 6.9 5.8  
Oakland -0.2 2.1 1.8 2.2 2.3 10.4 9.4 8.9 8.1 7  
Santa Cruz 1.3 2.8 0.7 1.1 1.2 12.1 10.9 10.5 9.7 8.7  
Vallejo 0.6 2.8 1 1.6 1.9 11.5 10.1 9.6 8.8 7.9  
California 1 1.4 1.5 1.9 2 11.8 10.7 10.2 9.4 8.4  
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 2012 California Forecast 
  • California continues to experience a sluggish recovery.  We forecast the economy will grow at a 2.5% pace in 2012 and 2013, a very slight improvement from the first two years of recovery when growth in real gross state product averaged less than 2%.
  •  California unemployment rate has declined to 11.0%, but will decrease more slowly over the next year and is projected to remain at or about 10% until fall of 2013. 
  • Payroll jobs continue to grow at a steady rate, but the state has still only recovered one of every four jobs lost in the recession.  Non-farm employment will recover its pre-recession peak in the first quarter of 2016.
  • Despite sluggish job creation, real personal income is expected to approach and exceed its 2008 peak in the second quarter of 2012 due to stronger recovery in non-wage income and higher wage industries such as technology.
  • After 9 years of zero net job growth from 2007 to 2016, the state's population will have grown by more than 3.3 million people, keeping unemployment near 8% at the start of 2016.
  • 295,000 new Construction jobs are expected to be created over the next five years, about 24.2% of California's total non-farm job growth.  Despite leading the state in job growth between 2012 and 2016, there will still be 100,000 fewer Construction jobs in 2016 than before the recession in 2006.
  • The trend of gradual growth in Manufacturing employment is expected to strengthen in 2012 with employment increasing by 1% or 32,000 jobs.
  • The Health Services sector was the only private sector to experience consistent job growth throughout the recession, adding nearly 25,000 jobs per year throughout the recession.  Healthcare employment will grow at a slightly faster rate in the coming years, adding over 30,000 jobs per year in 2012 and 2013. 
  • Professional Scientific & Technical Services led all industries in job growth in 2011, but will slow to about 2% growth over the next two years.
  • State and local government employment, including public schools, has decreased by 140,000 since 2007.  Government jobs will not reach a bottom until later this year. 
  • Multi-family housing starts are rebounding strongly; but single family housing starts will remain near record lows at 24,000 units in 2012.  Single family starts are projected to increase rapidly in 2014, and surpass 100,000 units in 2016, about two-thirds the level of construction in 2004 and 2005. 
 

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