California economy to slowly improve in 2012: study

LOS ANGELES Wed Feb 15, 2012 8:35am EST

Professional skateboarder Jordan Hoffart sets up a new skateboard at a shop in Escondido, California January 5, 2012.    REUTERS/Mike Blake

Professional skateboarder Jordan Hoffart sets up a new skateboard at a shop in Escondido, California January 5, 2012.

Credit: Reuters/Mike Blake

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LOS ANGELES (Reuters) - California's economy, the biggest in the United States and the ninth-largest in the world, will see a slight improvement in 2012 but a recovery in the crucial housing market is at least two years away, according to a report released on Wednesday.

California was one of states hardest hit by the 2007-2009 recession and will continue to lag national economic indicators as the national picture improves, says the report by the Los Angeles County Economic Development Corporation (LAEDC).

Overall, the report forecasts that California will see economic growth of 1.5 percent this year, and will add 200,000 jobs, with the unemployment rate averaging 11.1 percent.

That compares with a national average today of 8.3 percent unemployment, down from 9.1 percent in January 2011.

The Californian economy "will continue to heal but the process is uncomfortably long," the report says. Unemployment will still be at 10.3 percent in 2013, according to the LAEDC, a nonprofit economic development organization.

The leading economic sectors in 2012 will be the booming technology sector centered around companies such as Google and Facebook in Silicon Valley, tourism, international trade and the entertainment industry.

But the crisis-hit housing sector in California, although expected to see some improvement, is still a long way from full recovery, the study says.

Southern California was particularly hard hit by the collapse in the housing market and the financial crash of 2008, with an epidemic of foreclosures. Even today, 44 percent of homeowners in the region owe more on their mortgages than their homes are worth.

"As the calendar turned to 2012, the timeline for recovery in the housing market continued to be measured in years and not in months," the report says.

BUYERS WANTED

A huge backlog of foreclosed homes that have yet to be sold continues to depress house prices, which increases the number of mortgage holders with negative equity. In 2011 home prices in California actually fell compared to 2010.

"To date, rock-bottom mortgage interest rates and good affordability have not been enough to entice buyers back to the market," the report states.

"What happens in 2012 will depend on how fast lenders work through their foreclosure files."

In addition, the report says, "tighter mortgage lending standards and fundamentals such as slow job growth and flagging consumer confidence have dampened demand" in the housing sector.

The LAEDC forecasts a better housing market for California in 2012 but with significant risks remaining, especially if job growth fails to accelerate. Foreclosures and negative equity "remain significant hurdles to recovery," it adds.

The Californian economy is so large that its performance is inextricably linked to the national and global economies, the reports says.

California has fallen from eighth to ninth in the list of the world's largest economies, behind Brazil and Italy, but still ahead of India, Canada, Russia, Spain and Australia, according to the study.

(Reporting By Tim Reid; Editing by Xavier Briand)

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Comments (3)
JamesDrouin wrote:
What a load of codswallop. The only thing, repeat, the ONLY thing expanding in California’s economy is the number of illegal aliens entering the State.

California is STILL hemoraging businesses and the well-educated.

Feb 15, 2012 4:40am EST  --  Report as abuse
Chazz wrote:
A story about a coyote – California & South Dakota

California:

1. The Governor of California is jogging with his dog along a nature
trail. A coyote jumps out and attacks the Governor’s dog, then bites
the Governor.
2. The Governor starts to intervene, but reflects upon the movie
“Bambi” and then realizes he should stop because the coyote is only doing what
is natural.
3. He calls animal control Animal Control captures the coyote and
bills the State $200 testing it for diseases and $500 for relocating it.
4. He calls a veterinarian. The vet collects the dead dog and bills
the State $200 testing it for diseases.
5. The Governor goes to hospital and spends $3,500 getting checked
for diseases from the coyote and on getting his bite wound bandaged.
6. The running trail gets shut down for 6 months while Fish & Game
conducts a $100,000 survey to make sure the area is now free of
dangerous animals.
7. The Governor spends $50,000 in state funds implementing a “coyote
awareness program” for residents of the area..
8. The State Legislature spends $2 million to study how to better
treat rabies and how to permanently eradicate the disease throughout the
world.
9. The Governor’s security agent is fired for not stopping the
attack. The State spends $150,000 to hire and train a new agent with additional
special training re: the nature of coyotes.
10. PETA protests the coyote’s relocation and files a $5 million suit
against the State.

South Dakota:

1. The Governor of South Dakota is jogging with his dog along a
nature trail. A Coyote jumps out and attacks his dog.
2. The Governor shoots the coyote with his state-issued pistol and
keeps jogging.
3. The Governor has spent $0.50 on a .45 hollow point cartridge.
4. The Buzzards eat the dead coyote.

And that, my friends, is why California is broke and South Dakota is
not!

Feb 15, 2012 3:25pm EST  --  Report as abuse
Chazz wrote:
@JamesDrouin

I agree with your assessment that Cali is STILL hemorrhaging businesses, however, I’m not so sure about “the well educated.” If there were “well educated” people in California the government officials who have wrecked the Costa Concordia that we call California would never have been elected time and time again.

YO – surf’s up! Like…I gotta go….

Feb 15, 2012 3:33pm EST  --  Report as abuse
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