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California will suffer as the U.S. grows, forecast says

December 15, 2010 | 11:34 am

Desert
California's in trouble. We've heard it before and we hear it again in a forecast released Wednesday morning by California Lutheran University. The university's Center for Economic Research and Forecasting predicts job losses in California through 2011, even as the nation grows.

"While California will technically be in recovery, few will feel the impacts of that recovery," wrote Bill Watkins, the director of CERF. He said the state's job growth will lag the nation's for years.

There are a host of reasons for this, Watkins says. It's more expensive to do business in California than it is in other states, so businesses must squeeze more productivity out of existing workers. People are leaving the state, Watkins says -- about 3.6 million have left since 1990. And vast areas of the state, including the Inland Empire and the Central Valley, are still vastly overbuilt.

The unemployment rate will tick up to 12.5% in the last quarter of this year, staying above 11% next year, and falling to 10.2% by the first half of 2012, forecasters say. And new-home building permits, at 10,800 in the third quarter of this year, will only shrink in the next year and a half.

Even those who say California will prosper by creating tech jobs are wrong, Watkins says. He refers to a study by North Dakota's Praxis Group, which shows that California is the ninth-worst state in creating scientific, technical, engineering and math-related jobs (that's post the dot.com bust).

"There is no doubt, though, that unless policy is changed, California's future is dismal, characterized by high unemployment, limited opportunity, and the continued exodus of the working class," Watkins writes. "California's political class needs to accept this fact before California's future can change."

The future is much rosier for the United States. This is the first forecast in years in which no net U.S. job losses are forecast for any quarter. Job growth will start slow, with only 25,000 jobs added in the last quarter of this year, reaching nearly 200,000 by the end of 2012. The unemployment rate will dip below 9% by the end of next year.

Still, growth will be slow. The gross domestic product, which has grown erratically, if at all, in the last year, will start to grow consistently, but slowly, starting next year, not growing faster than 3%. Foreclosures will temper off slowly, and residential real estate prices will remain weak in 2011. 

But the fact that some growth will occur, for the first time in a long time, is reason to be optimistic, Watkins says.

"Finally, we should also remember the power of compounding," he wrote. "Even slow growth, compounded, will eventually produce large returns."

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-- Alana Semuels

Photo: A cloud over the Salton Sea. Credit: Keith Skelton via Flickr

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