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October 2012 California & Metro Foreacst

Oct 24, 2012

The slow California recovery is unlikely to pick up speed over the next year according to the latest report from the Business Forecasting Center at the University of the Pacific.  The forecast predicts economic growth will slow marginally from 2.5% in 2012 to 2% in 2013, and job growth ease from 1.8% to 1.6% in 2013. 

"The gain from gradual improvements in housing is being offset by a slowdown in exports and reduced government support for the recovery," said Jeff Michael, the Director of the Busines Forecasting Center.

In the regional outlook, the Center has revised its previous forecast for a number of areas of the Central Valley to reflect new data that show a more uniform recovery across the Valley.  The forecast for Stockton job growth in 2012 has been reduced from 4% to 3%, whereas Modesto and Merced forecasts have been revised up to reflect roughly 1% job growth in 2012, and are forecast to accelerate further in 2013 with help from the opening of the Amazon distribution center and the expected launch of high-speed rail construction towards the end of the year. 

While Sacramento economy is recovering as well, Capitol region job growth will remain below 2% for the next few years as government budgets remain tight regardless of the election outcome, and the Capital region's private sector is seeing gains in healthcare offset by headline grabbing closures by Campbell's and Comcast. 

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.  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)

2.0

2.5

2.0

2.9

3.7

3.2

Non-Farm Payroll Employment (% change)

1.0

1.8

1.6

1.7

2.1

1.9

Unemployment Rate (%)

11.8

10.7

9.8

8.8

7.5

6.5

Housing Starts (thousands)

45.6

59.8

94.2

131.9

168.9

189.5

 

 

 

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

1.3

1.6

1.7

2.3

11.9

10.6

9.8

9.0

7.9

 

Stockton

-1.0

3.1

1.5

1.8

2.4

16.8

15.2

14.8

14.1

12.7

 

Modesto

-1.5

1.2

2.3

1.7

2.0

16.8

15.6

14.9

13.8

12.7

 

Merced

0.6

0.2

2.9

2.9

2.3

18.3

17.6

16.8

15.9

14.6

 

Fresno

0.2

1.6

1.7

1.9

2.2

16.6

15.4

14.9

14.2

12.8

 

California 

1.0 

1.8 

1.6 

1.7 

2.1 

11.8 

10.7 

9.8 

8.8 

7.5 

 

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

3.4

2.0

1.4

1.7

8.2

7.0

6.1

5.1

4.2

 

San Jose

2.8

3.6

2.1

2.0

2.5

9.9

8.5

7.7

6.8

5.5

 

Oakland

0.0

2.0

1.9

1.9

2.3

10.4

9.1

8.4

7.6

6.4

 

Santa Cruz

1.3

3.0

1.2

1.2

1.9

12.1

11.1

10.6

10.0

9.0

 

Vallejo

0.6

1.8

1.3

1.7

2.2

11.4

10.2

9.4

8.6

7.5

 

California 

1.0 

1.8 

1.6 

1.7 

2.1 

11.8 

10.7 

9.8 

8.8 

7.5 

 

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 October 2012 California Forecast

 

  • California continues to experience a sluggish recovery.  We forecast the state economy will grow an average 2.5% in 2012 and 2% in 2013, a similar pace to the first two years of recovery.  Growth will accelerate above 3% in 2014 and 2015.

 

·         California unemployment rate has declined rapidly to 10.2%.  We expect the improvement in the unemployment rate to slow with increased labor force growth.  The state unemployment rate is not projected to remain above 9% until 2014.

 

  • Payroll jobs continue to grow at a slow, steady rate, but the state has recovered less than two of every five jobs lost in the recession.  Non-farm employment is forecast to recover its pre-recession peak in the fourth quarter of 2015.

 

  • Single-family housing starts will begin to rebound in 2013, with over 45,900 single-family housing starts and 48,300 multifamily housing starts.  By 2016, single-family housing starts could surpass 100,000 units and stabilize at a level that is about two-thirds the pre-recession peak. 

  

  • State and local government employment, including public schools, has decreased by 145,000 jobs since summer 2007.  Government employment will bottom out over the next year, and will only add back 66,000 jobs by the end of 2016.

  

  • 245,000 new Construction jobs are expected to be created over the next four years, about 20% of California's total non-farm job growth.  Despite leading the state in job growth between 2012 and 2016, there will still be nearly 120,000 fewer Construction jobs in 2016 than before the recession.

 

  • The trend of gradual growth in Manufacturing employment is expected to reverse in 2012 with an employment loss of -0.2%.  Growth is expected to return in 2013 at 0.4%.

 

  • 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 40,000 jobs per year over the next four years.

 

  • Professional Scientific & Technical Services led all industries in job growth in 2011 and will grow strongly in 2012 with a larger 4.8% increase. Only the Admin & Support industry will post a stronger gain of 5.2%.

 

  • Despite sluggish job creation, real personal income is expected to approach and exceed its 2008 peak in the third quarter of 2012 due to stronger recovery in non-wage income and higher wage industries such as technology.

  

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