Report: Worst over, but slow rebound for Calif. economy

Report: Worst over, but slow rebound for Calif. economy
In this photo taken on on Thursday, Feb. 3, 2011, an unidentified job seeker looks for an auto mechanic job opportunity at the Verdugo Job Center in Glendale, Calif. (AP Photo/Damian Dovarganes)
SACRAMENTO, Calif. (AP) — California is on a slow road to economic recovery, with gradual job growth ahead but double-digit unemployment likely to continue through 2012, according to a forecast released Tuesday.

A weak dollar and increased foreign demand are pushing up international trade and associated jobs, San Rafael-based Beacon Economics noted, but sectors tied to the hard-hit housing market have seen little growth. The real estate, rental and leasing industry hit a new low in January, the report said, and apart from a January bump "construction has yet to emerge from the doldrums."

California has seen a much smaller exodus of residents than during the previous recession in the 1990s. Fewer than 500,000 residents have migrated out of the state during this recession, while 1.5 million Californians left from 1991 through 1998.

Part of the difference, is that this downturn is far more widespread, the report said. Nearby states have been hit just as hard as California, leaving few options for those seeking better employment opportunities.

In addition, homes have become much more affordable. Beacon expects home prices in California to remain relatively flat into 2012, with a gradual rise in sales.

The report urged patience as the state, which has had an unemployment rate at or above 12 percent since August 2009, struggles to emerge from a recession that has dragged on for more than three years.

"This was a severe recession, and it will take time to recover," it said.

Nationally, the report predicted modest growth through the rest of 2011 and into 2012. But it said the need to address the federal budget deficit and the threat of inflation will bring a slowdown or worse in 2013.

"The path in both the money supply and the deficit worry me," particularly because the 2012 election is likely to make it politically difficult to address those problems soon, said Christopher Thornberg, a founding partner of Beacon and one of the authors of the report.

A national slowdown was likely when efforts to fight inflation and add taxes or cut spending kick in, he said.

"And if they're not responsible about the slowdown, it could be a catastrophe," Thornberg said, noting that sliding into another recession is possible.