The glass is half full. No, it's half empty. Both UCLA's Anderson Forecast and Beacon Economics are offering subdued assessments of the state and local economies. They're certainly not terrible (Beacon discounts the chance of a double-digit recession), but they're not wonderful either, especially this year. And they're careful to assume that Europe doesn't knock the stuffing out of everything. Both reports, which were released this morning, say much the same things, although in somewhat different ways. Anderson's California forecast, which focuses on the state's housing market, expects home construction to improve not this year but in 2013. From economist Jerry Nickelsburg:
There is a shift in demand from singlefamily housing in Inland California towards multifamily housing in Coastal California. Multi-family housing projects in more densely populated areas, in part due to local zoning requirements and the CEQA process, simply require more time to bring to fruition. Second, high unemployment dramatically slowed household formation during the recession. Job growth is projected to be slow this year and therefore the recovery of household formation, a precursor to demand driven new construction, will be slow as well. It should be noted however that our latest Allen Matkins Multi-Family Housing Developer Sentiment Survey shows considerable optimism on the part of developers.
Nickelsburg sees job growth of 1.9 percent in 2012 and 1.8 percent in 2013, with the unemployment rate hovering around 10.6 percent through the end of the year.
In the Eagles song "Tequila Sunrise" the last lines are "this old world still looks the same, another frame."12 Don Henley and Glenn Frey could have been writing about the last six months of economic recovery in California. It has been slow and bumpy, but with very much the same character. With signs of a turn in the housing market in 2012 discounted, we are left with continued widespread sectoral growth led by tech-laden business, geographic disparity, structural unemployment and contracting construction. and government sectors. The second quarter of 2012 is just "another frame," and our forecast still looks the same. This means that our forecast has been relatively accurate, a good thing, and that California will not see single-digit unemployment until 2013, a bad thing.
Beacon economists also believe growth will be frustratingly slow over the next couple of years - somewhere in the 2-3 percent range. But they expect California's recovery to outpace the U.S. overall, with employment growth averaging 1.5 percent this year and 1.9 percent next year. Again, not terrible but not wonderful. From the report:
The recovery is healing, although the pace of the recovery leaves much to be desired. Beacon Economics does not foresee a double-dip on California's horizon, despite recent news regarding sluggish job growth, falling exports, or the state's General Fund underperformance. Key structural issues remain intertwined in California's economic performance and future growth opportunities. But the waning of cyclical recessionary effects provide an opportunity to refocus on fundamental problems such as the budget, educational attainment, and the high cost of housing - issues that might be addressed to ensure California's future remains bright.