Fourth year of sluggish growth forecast for California

Published: Wednesday, Feb. 13, 2013 - 12:00 am | Page 6B
Last Modified: Friday, May. 17, 2013 - 12:36 pm

The good news is California's economy will keep growing this year. The bad news is it will be more of the same lackluster growth the state has seen since the recession ended in 2009.

California will experience a fourth straight year "of sluggish recovery," according to a forecast released Tuesday by the University of the Pacific.

That translates into gradually subsiding unemployment and improvement in key metrics such as income. But there's no economic boom in sight, at least not in 2013. UOP predicted growth would improve in 2014 and 2015.

UOP economist Jeff Michael said one issue holding back the recovery – in California as well as the nation – is that "the federal government isn't helping anymore." The stimulus has run its course, payroll taxes increased in January and the possibility of significant federal budget cuts looms over the entire economy.

"Defense spending is the biggest concern in California," said Michael, director of UOP's Business Forecasting Center.

Michael said the state is doing marginally better than the U.S. economy in job creation. California's unemployment rate was 9.8 percent in December and is expected to average 9.4 percent this year and 8.6 percent next year.

The technology-rich Bay Area remains the state's shining economic star. But Michael said the Sacramento region, after lagging behind much of the state in the past few years, should grow at a more rapid pace in the coming years.

The key reasons are the improvement in the housing market and the stabilization of the state budget, thanks to higher taxes approved by voters.

"As we see improvement in both of those (sectors), we'll see expansion in the Sacramento economy," Michael said.

Sacramento area unemployment, which ended 2012 at 9.8 percent, is expected to remain above 9 percent throughout the year. It will fall below 9 percent in the second quarter of 2014, according to the forecast.

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