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California and Metro Forecast: August 2012

Aug 21, 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 1.8% pace.  California's unemployment rate is currently 10.7%, and is projected to remain in double digits through the second quarter of 2013.  In 2014 and beyond, the pace of recovery will gradually accelerate as housing and construction begin making a positive contribution to the economy.  Housing starts are projected to double from current levels in 2014.

The regional outlook shows that 2012 is the first year of economic recovery in most areas of the hard hit Central Valley.  Despite being home to the nation's largest municipal bankruptcy and having lost 12.5% of its jobs between 2007 and 2011, the Stockton area is currently leading the region in job growth fueled by its expanding role as a transportation and distribution center, the construction of a nearly-$1 billion correctional healthcare facility, and some initial recovery in healthcare and service sectors.

A variety of policy actions with uncertain effects loom particularly large for the Central Valley in 2013: including uncertain state education funding, lawsuits that could impact the start of high-speed rail construction, and the effects of implementing California's cap-and-trade greenhouse gas program on the Valley's energy intensive economic base of food processing, transportation, and agriculture.  These policy issues are somewhat less critical to the Sacramento region, but renewed furloughs and the outcome of the Governor's tax initiative.  The Bay Area continues to lead the state's recovery, and has now spread beyond San Jose and the technology surge.  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/.

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California Annual Forecast Summary

 

 

 

2011

2012

2013

2014

2015

2016

Real Gross State Product (% change)

1.6

2.6

2.3

3.3

3.6

3.2

Non-Farm Payroll Employment (% change)

1.0

1.7

1.8

1.8

2.0

1.7

Unemployment Rate (%)

11.8

10.6

9.8

8.9

7.8

7.1

Housing Starts (thousands)

45.0

53.7

79.3

116.5

151.8

172.6

  

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

1.0

2.0

2.1

2.5

11.9

10.6

10.0

9.3

8.2

 

Stockton

-1.0

4.0

1.6

2.1

2.2

16.8

15.0

14.6

13.6

12.2

 

Modesto

-1.5

0.3

2.2

1.8

1.9

16.8

15.2

14.4

13.6

12.5

 

Merced

0.6

-0.8

1.4

1.8

2.0

18.3

16.8

16.4

15.6

14.5

 

Fresno

0.2

1.8

1.9

1.9

2.1

16.6

15.2

14.5

13.7

12.7

 

California

1.0

1.7

1.8

1.8

2.0

11.8

10.6

9.8

8.9

7.8

 

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

2.6

1.9

1.5

1.6

8.2

6.9

6.2

5.6

4.8

 

San Jose

2.8

3.4

2.4

2.2

2.5

9.9

8.4

7.5

6.7

5.8

 

Oakland

-0.2

2.0

2.0

2.1

2.3

10.4

9.1

8.4

7.6

6.7

 

Santa Cruz

1.3

4.3

1.4

0.9

1.1

12.1

10.8

10.4

9.8

9.0

 

Vallejo

0.6

2.3

1.0

1.4

1.9

11.4

10.1

9.2

8.6

7.8

 

California

1.0

1.7

1.8

1.8

2.0

11.8

10.6

9.8

8.9

7.8

 

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 August 2012 California Forecast

  • California continues to experience a sluggish recovery.  We forecast the economy will grow an average 2.6% in 2012 and 2.3% in 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 10.7% and will continue to decline steadily, falling below 9% in 2014 and below 8% in 2015
  • 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 fourth quarter of 2015
  • 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 3.4 million people, keeping unemployment above 7% in 2016
  • 285,000 new Construction jobs are expected to be created over the next four years, about 26% of California's total non-farm job growth.  Despite leading the state in job growth between 2012 and 2016, there will still be nearly 100,000 fewer Construction jobs in 2016 than before the recession
  • The trend of gradual growth in Manufacturing employment is expected to weaken in 2012 with employment growth falling to just 0.1% or 1,600 jobs
  • The Health Services sector was the only private sector to experience consistent job growth throughout the recession, adding 27,500 jobs per year throughout the recession.  Strong employment growth will continue in the coming years, adding over 30,000 jobs per year over the next four years
  • Professional Scientific & Technical Services led all industries in job growth in 2011 and will again in 2012 with a stronger 4.1% increase
  • State and local government employment, including public schools, has decreased by more than 131,000 since summer 2007.  Government employment will bottom over the next year, and will only increase by 60,000 jobs by the end of 2016
  • Single-family housing starts will begin a slow rebound in 2013, with over 38,000 single-family housing starts and 41,000 multifamily housing starts.  By 2016, however, single-family housing starts will surpass 100,000 units, about two-thirds the pre-recession peak. 

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