* Outlook brighter, but growth "uncomfortably" slow
* Recovery in California housing "still years away"
* State's jobless rate to stay around 11 pct in 2012
By Tim Reid
LOS ANGELES, Feb 15 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.
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
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.