Another hard year for California economy: report

Case worker Jessica Yon discusses eligibility for unemployed people at a jobs center in San Francisco, California February 4, 2010.

SAN FRANCISCO (Reuters) - California's economy faces yet more hardship this year marked by high unemployment as its labor market struggles to recover from steep job losses, the UCLA Anderson forecast unit said on Wednesday.

"Overall, the outlook for the balance of the year is for little to no growth," the unit said in a report. "The economy will begin to pick up slightly in the beginning of 2011 and by the middle of 2011, begin to grow at more normal levels."

Californians looking for work may still be searching throughout this year as total employment in the state will shrink by 0.7 percent before recovering next year and growing faster than the labor force at a rate of 2.3 percent.

"You'll see slow improvement," said Jerry Nickelsburg, a senior economist with the UCLA Anderson Forecast unit. "It's still going to feel like we have not climbed up from the bottom that we hit in the recession."

California's jobless rate has peaked at 12.5 percent and will decline slowly and average 11.8 percent this year, the report said -- adding that the rate will not fall below double digits until 2012.

California is not producing sufficient jobs for new entrants to the labor force which means elevated unemployment levels will persist once job layoffs cease, the report said.

'FITS AND STARTS'

Job growth in California, which would rank among the world's biggest economies were the state a country, will be marked by "fits and starts" until later this year. It will be led by health, professional and business services, export, construction and technology related manufacturing sectors.

Home-builders will not be adding to payroll gains in California, one of the states hardest hit by mortgage turmoil and foreclosures, the report said.

Commercial construction and public works projects will also be of little help given difficulty in financing new projects. Slack demand from a slow recovery in employment will hold back any resumption of new office building, the report said.

Much industrial space is dedicated to logistics and distribution of imported goods and occupancy rates are too low to demand new construction until consumer demand picks up.

Meanwhile, stimulus-funded infrastructure will break ground slowly. "Nonresidential building is unlikely to be a factor in 2010 and early 2011 job growth," the report said.

UNCERTAIN 'GREEN" FUTURE

Public-sector employers will not be hiring as the state government and local governments face lean budgets amid weak revenue. California's much vaunted efforts to create environmentally friendly "green" jobs will not propel the state's economy as some predict, the report said.

Green business, and information and biotechnology will be growth areas in California over the next decade but objective data does not suggest Green will push growth rates above the U.S. growth rate, the report said.

Whether green technology turns into the kind of jobs machine aerospace and the Internet were in their heyday for California remains to be seen.

"Private investors are betting that way, the past suggests it is entirely possible, but innovation in a new industry -- or in the case of Green, several new industries -- tends to have a mind of its own," the report said.

(Editing by Andrew Hay)