| SAN FRANCISCO, March 25
SAN FRANCISCO, March 25 California's economy,
the world's eighth largest, will struggle through a worse than
expected recession and will not begin to recover until next
year, with normal growth resuming late in 2010, a UCLA Anderson
Forecast report released on Wednesday said.
But even in recovery, the Golden State will suffer a high
level of unemployment -- 10.5 percent in February, its highest
level in nearly 26 years, the report said.
"The current forecast reflects a deeper and longer
recession than we previously thought," the forecasting unit's
"Overall our outlook for California is for a very weak
first three quarters of 2009 and virtually no-growth in the
fourth. The economy will begin to pick up in 2010 and by the
end of 2010 will be growing at more normal levels."
The forecasting unit's view of California's economy in
December had been "somewhat pessimistic." Since then it has
turned considerably more pessimistic.
"What we did not realize was how fast things would
deteriorate," the report said, adding that California's current
slump could go down in the books as its worst downturn since
the end of World War II.
California's economy has, along with the rest of the United
States, been hurt by consumers reining in spending. Disarray in
the financial sector also froze nonresidential construction
while housing remains in a slump, said Jerry Nickelsburg, a
senior economist with the unit.
Shrinking trade has also hurt California's economy, whose
ports are major gateways for imports and exports crossing the
"When U.S. consumption turns down, that's really amplified
in California," Nickelsburg said.
KEYS TO RECOVERY
A rebound in trade is one of the keys to California's
economic recovery along with renewed building and the return of
shoppers to malls, according the UCLA Anderson report.
Until those activities improve, California's economy will
stagger. "As the recession deepens, the diverse engines of
California's economy find themselves running on fumes," the
Federal stimulus money for public works will come too late
to be of much help to California's jobs market this year and it
may be held back in the future if the state government raises
taxes, which may discourage companies from staying in or moving
into the state, the report said.
California's jobs market will worsen, with the state
averaging an 11.7 percent unemployment rate this year and high
unemployment persisting after this recession's wave of layoffs
ends because the state is not producing enough jobs for new
entrants to its labor force, the report said.
Amid all the gloom, there are some bright spots in
California's economy -- including its battered housing market.
Home prices in California remain under pressure because of
foreclosures, but investors are snapping them up. Additionally,
home builders are barely building so the state's housing
inventory is shrinking. Both may help stabilize home prices,
perhaps as soon as later this year, according to Nickelsburg.
(Editing by Bernard Orr)