California residential construction expected to rebound soon in coastal areas, but housing backlog in Central Valley, inland Southern California will need to be worked off before homebuilding recovers: UCLA Anderson forecast
March 24, 2010
Much-hyped green jobs are unlikely to give a big lift to California's employment numbers, which are expected to remain weak throughout the year as the state muddles through a modest recovery, according to an economic forecast released Wednesday.
The quarterly Anderson Forecast from the University of California, Los Angeles said the state's abundance of universities and research labs, along with its dominance as a magnet for tech-focused venture capital, have positioned it to lead the country in environmentally minded industries.
But there's no sign that demand for solar-panel installers, wind-farm workers and other green positions will be strong enough to drive California's unemployment rate below the national average, the forecast said.
"As we look at the hype around 'green is going to drive the economy,' the fact is, not really," Jerry Nickelsburg, author of the forecast, said in an interview.
The forecast sees the economy picking up slightly at the beginning of 2011 but not producing enough jobs to drop the unemployment rate to single digits until 2012.
Unemployment was forecast to decline throughout 2010 from the 12.5 percent posted in January -- the highest rate seen during the recession -- and average 11.8 percent for the year. The national rate is 9.7 percent.
Total employment will contract by 0.7 percent in 2010 but should grow at a rate of 2.3 percent in 2011, the report said.
The growth will be fueled by exports of manufactured and agricultural goods and rebounding consumer demand for products from California factories, as well as for Asian imports that would stimulate the state's warehousing and shipping industries, the forecast said.
Increased public works construction and investment in business equipment and software will also prop up the California economy, it said.
Residential construction could soon rebound in coastal areas, where home prices have started creeping up as inventory dwindles.
But the backlog of unsold homes in inland Southern California and the Central Valley will have to be sold off before homebuilding returns as a powerful economic force, the forecast said.
Federal stimulus money, meanwhile, will boost public works spending in the coming years, but few projects are likely to start in the near-term due to lengthy planning, permitting and contracting processes.
The forecast also noted there have been fewer cuts than expected to the state government payroll, suggesting high personnel costs would limit government spending and tax incentives aimed at boosting employment.
"We're starting to recover, but the beginnings of this recovery in California are going to be pretty slow," Nickelsburg said.
Nickelsburg said California has geographical advantages such as its proximity to the vibrant economies of East Asia that could help it emerge from the recession more swiftly than other states.
Windy coastlines and mountain passes also make California fertile ground for developing wind power, while its deserts could be a staging ground for the solar industry.
But those advantages are unlikely to translate into a bonanza of green jobs similar to the employment growth prompted by defense spending in the 1980s, the Internet revolution in the 1990s and the homebuilding boom of the past decade, the forecast said.
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