New forecast sees Cal recession

Economists at the University of California-Santa Barbara’s Economic Forecast Project had been holdouts on whether the state’s economy was dipping into recession, even as those from other economic study organizations said it was.

Bill Watkins, who heads the UC-Santa Barbara forecasting unit, has now joined the crowd, concluding that recent data point to a “relatively mild California recession” while the nation as a whole narrowly avoids one.

“California's current weaknesses include the budget crisis and reduced capital availability in initial-stage venture capital,” Watkins writes in an updated forecast released last week. “These weaknesses, along with a decimated residential real estate sector, imply that once again, Californians will again suffer more difficult economic times than will most Americans. Even if the United States manages to avoid a recession, California will likely not avoid a recession.

”California will lose jobs in the coming months. The tech sector will be weak. Unemployment will climb more rapidly than in the remainder of the United States. Domestic migration out of the State will accelerate. California's budget, already in crisis, will become worse. Local governments will see serious fiscal challenges.

”Perhaps this sounds worse than it is. Our forecast is for a relatively mild California recession, while we expect the United States to narrowly avoid a recession.”

The full forecast is available only to subscribers but the Economic Forecast’s website is available here.

Californians sour on economy, politicians

California voters are souring on the economy and their elected state leaders, including Gov. Arnold Schwarzenegger, and Republican Sen. John McCain would have a fighting chance of winning the state next fall, a comprehensive new attitudinal survey indicates.

Those and other findings are contained in the latest in a regular stream of polls by the Public Policy Institute of California. Among those other findings are that Californians’ attitudes towards illegal immigrants are becoming more positive and that they’re quite concerned about the state’s chronic budget crisis.

The full poll report is available here.

New study probes English-learners

EdSource, a Mountain View-based organization that collects and disseminates data about public education in California, has issued a new study concluding that nearly half of the state’s six-plus million K-12 students come from homes in which languages other than English are spoken.

Its study of what are called “English-learners” also found that 85 percent come from Spanish-speaking homes, but that more than 50 languages are represented. And it also found a correlation between students’ learning English and their academic progress and socioeconomic status.

The report lends statistical credence to the more traditional, learn-English-quickly side of California’s perennial debate over bilingual education, which voters symbolically, if not actually, outlawed in the 1990s.

The full EdSource report on English-learners is available here.

Job picture brightens - maybe

California’s employment picture, which had been darkening for months, appeared to brighten a bit in February – but only on paper.

Officially, according to the state Department of Employment Development, the state added 25,800 non-farm jobs in February after losing 29,300 in January, but it appears that most of the gain represented an end to the Hollywood writers’ strike rather than any fundamental improvement.

Moreover, when employment data were seasonally adjusted by EDD the number of Californians working dropped by 2,000 to 17,217,000 and the unemployment declined fractionally to 5.7 percent from January, thanks mostly to a drop in the overall labor force. The 5.7 percent jobless rate was still up sharply from 5 percent in February 2007, reflecting continuing softness in the financial and housing sectors. That means more than 100,000 more California workers were jobless in February than a year earlier while job creation has been flat on a year-to-year basis.

Beacon Economics, a private economic forecasting service, contends in its analysis of the data that February’s supposed job growth will be adjusted downward.

Beacon’s analysis is available here and the complete EDD report is accessible here.

California may have dropped into recession

Economic forecasters at the University of California’s Los Angeles and Santa Barbara campuses, as well as those of most other organizations that track the California economy, have said that the state hasn’t yet dropped into recession.

But economists at Stockton-based University of the Pacific say the state is, indeed, already in recession due largely to the meltdown of the housing industry – a decline that, ironically, is most evident in Stockton and other Central Valley communities.

The good news is that UOP’s Eberhardt School of Business believes that the recession will be brief and mild, with housing and job creation hitting bottom this year and then rebounding in 2009. The full UOP report is available here.

Cal's Supreme Court most influential

California's Supreme Court has long been considered to be the nation's most influential state court, and a new statistical study confirms it.

Jake Dear, chief supervising attorney for the state Supreme Court, and Edward W. Jessen, the official reporter of court decisions, describe the research and findings in a newly published article in the UC Davis Law School's law review.

Since 1940, California Supreme Court decisions have been specifically followed at least once by a court in another state 1,260 times, nearly three times the median for state supreme courts and substantially more than the next most-followed courts, those of Washington (942) and Colorado (848).

The data came from a special analysis of Shepherd's Citations Service, which tracks appellate decisions in all states, conducted by Shepherd's provider, LexisNexis.

The authors, however, say that the number of cited decisions "often represents only the tip of the iceberg in terms of any particular decision's real-life influence. For example, in the area of business law, a state high court opinion may quickly affect business practices in the home state and nationwide, so that the underlying issue is unlikely to arise in a similar context in another state. Decisions of this sort may have far-reaching impact but result in few measurable follows."

The UC Davis law review article is available here.

Field Poll's voter prediction hits mark

The final numbers are in, and they reaffirm the almost uncanny accuracy of the Field Poll’s prediction that 56.6 percent of California’s registered voters would cast ballots in the Feb. 5 presidential primary election, the first-ever such February election in state history.

Secretary of State Debra Bowen had refused to issue her office’s traditional prediction of voter turnout, citing the unusual nature of the election. Field, the state’s oldest polling operation, took the plunge, based on its telephone surveys of likely voters.

Last week, Bowen’s office revealed that voter turnout last month was 57.71 percent, the highest level of primary voter participation since 1980, clearly resulting from sharp, multi-candidate presidential nomination duels in both parties. The final count was delayed by a deluge of last-minute absentee and provisional ballots.

Sen. Hillary Rodham Clinton won the Democratic vote with 51.5 percent, followed by Sen. Barack Obama at 43.2 percent. Sen. John McCain won the Republican contest with 42.3 percent of the vote and has since clinched the GOP nomination while Clinton and Obama continue to battle.

The full and official report on the Feb. 5 results is available here.

California a "sinner" on lawsuits

California is listed as a “sinner” when it comes to the risk and cost of liability lawsuits, according to a new state-by-state study by the conservative, San Francisco-based Pacific Research Institute.

The state is ranked 34th among the 50 states in a complex system developed by PRI that considers laws on the books, actual lawsuit results and other factors. South Dakota was the least litigious state in the PRI study and dubbed a “saint” while Florida was the most, based on 2006 data.

“In the competition for jobs and capital investment among the states, those states that suffer from high tort costs and litigiousness will continue to lose jobs and businesses to states with superior tort systems,” study-co-author Lawrence J. McQuillan said. “PRI developed the Index as a tool for governors and state legislators to assess their tort systems and to enact laws that will improve the business climate of their states.”

Business and professional groups battle ceaselessly with consumer groups, environmental groups and lawyers who specialize in civil liability cases over the rules governing lawsuits in the California Legislature, with their battles occasionally spilling over into ballot measures, In the main, however, what some call “tort war” has been a political stalemate.

While the former contend that excess litigiousness discourages job-producing business investment and lines the pockets of lawyers, the latter contend that suits are a bulwark against corporate malfeasance and protect individuals against mistreatment.

The full PRI study is available here.

State revenues still below par

State revenues are still running below estimates for the current fiscal year and the state is borrowing heavily to cover its cash flow shortage, state Controller John Chiang says in his monthly report on income and outgo.

It’s the latest bit of evidence that the state faces a whopping deficit for the next fiscal year. The Legislature’s budget analyst has estimated that for the last half of the 2007-08 fiscal year and all of the 2008-09 year, the deficit is $16 billion, of which about half has been covered by a series of borrowings, fund shifts and spending cuts.

The Capitol is in the throes of debating whether to cover the other half through spending cuts, as Gov. Arnold Schwarzenegger proposes and other Republicans endorse, or at least partially with new revenues, as Democrats demand.

Chiang reported that the state general fund began the 2007-08 fiscal year with a $2.5 billion cash balance but has spent $15.7 billion more than it received in income since then, with the $13.2 billion balance covered with $7 billion in “revenue anticipation notes” that must be repaid by June, $3.3 billion in borrowing from a bond issue authorized by voters in 2004 and about $3 billion in loans from other state accounts.

The $3.3 billion in bond borrowing and other steps may have staved off a projected cash flow crisis next summer after the state repays its revenue anticipation notes, but the projected deficit is still looming. Whether the deficit shrinks or grows depends largely on the size of the state’s annual surge of personal income taxes as taxpayers file their returns by April 15. If that’s below estimates, the deficit is likely to grow and will be reflected in the governor’s revision of his budget in May, an annual exercise that will touch off the annual political bargaining over the budget.

The controller’s cash flow report is available here.

Does transit really save that much?

CALPIRG, a consumer and environmental advocacy group, has issued a report touting the economic and environmental benefits of mass transit, centered on California, and urging greater investment in transit systems, but its actual numbers are less than overwhelming.

CALPIRG’s study concluded that California saves nearly 500 million gallons of oil a year, “roughly equivalent to taking more than 800,000 cars off the road (which) has made California far less dependent on oil than we otherwise would be.” With gasoline and diesel fuel prices rising sharply, CALPIRG contends, transit “results in more than $1.2 billion in gasoline cost savings annually for consumers.”

Those sound like big numbers, but when compared to other data, they shrivel to fractional status. Take the nearly 500 million gallons of oil (the actual CALPIRG number is 486 million) supposedly saved by using buses, light and heavy rail and other forms of transit, for instance.

Oil consumption is usually expressed in terms of barrels (55 gallons to a barrel) but by expressing the figure as gallons, it sounds bigger than it is. That translates into about 9 million barrels of oil saved each year, which is only about 10 hours of U.S. oil consumption.

Putting it into perspective in California terms, the state’s vehicles consume about 19 billion gallons of gasoline and diesel fuel each year and at $3.50 a gallon, that translates into vehicular fuel expenses of more than $66 billion a year, or roughly 4.5 percent of the state’s personal income stream. Refining that fuel requires some 45 billion gallons of crude oil a year, or about 800 million barrels.

Overall, therefore, if CALPIRG’s data are accurate, transit accounts for a 1.8 percent savings on fuel costs to Californians and a 1.1 percent savings in oil consumption. Interesting, perhaps, but still indicating that when it comes to fueling their personal transportation, Californians are still not spending a huge percentage of their incomes, and mass transit, at least as it exists, just isn’t very important.

The full CALPIRG report is available here.

Housing prices down, affordability up

Even though there's much angst in California over declining home prices, one silver lining is that housing is becoming marginally more affordable. But a new analysis of home price data from the Palo Alto-based Center for the Continuing Study of the California Economy says that despite the decline in the housing market, the state's home prices "are still high in relation to income and prices in other areas."

CCSCE determined that 33 percent of first-time buyers could to buy a median-priced home in the fourth quarter of 2007, up sharply from 24 percent in third quarter and the higher affordability index since late 2004.

The full CCSCE report, including links to the underlying home price data from the California Association of Realtors and other sources, is available here.

Economy, budget double dose of bad news

The liberal California Budget Project sees a double dose of bad news for California's working class families in the state's economic slowdown and Gov. Arnold Schwarzenegger's proposal to slash spending for education, health care and other public services to close a large budget deficit.

The CBP has developed a series of reports on the impacts of the flattening of the state's economy, which has manifested itself in virtually no job growth in 2007 and a rising unemployment rate, and the governor's budget proposal. The budget impact reports concentrate on schools, in-home services to the disabled, child care and welfare recipients. All are available here.

Jobless rate rises as job creation sputters

As California’s population continues to grow by about 500,000 each year, the state must create at least 200,000 new jobs to keep pace with the growth of the labor force and it looks as if employment growth last year was essentially flat, raising the number of unemployed by nearly 200,000

That flat job growth underscores the state’s economic malaise and the increasing state budget deficit and is largely attributed to the sharp decline in the housing industry, which had been the most expansive sector of the economy during the mid-decade period.

The state Employment Development Department released data last Friday that’s calculated two different ways and both show little growth in jobs. EDD’s survey of employers counted 15,150,700 non-farm workers in the state while a separate survey of households put employment, including self-employment, at 17,219,000.

The first number is 15,000 jobs more than in January 2007 while the second is 60,000 higher. The state’s official unemployment rate of 5.9 percent was up nearly a full percentage point from January 2007 and the number of unemployed workers, 1.1 million, was 182,000 higher than a year earlier, largely due to a more than 200,000-person growth in the labor force.

The biggest impact of the job slowdown was seen in Southern California, the Center for the Continuing Study of the California Economy said in its analysis of the data. Southern California lost 27,500 jobs last year while the San Francisco Bay Area gained 35,700 and other regions also saw modest gains.

When the effects of the housing slowdown on construction, manufacturing and finance is set aside, the rest of the state’s economy appears to be doing relatively well, CCSCE and other economic data analysts say.

The full EDD employment report, including county-by-county data, is available here.