Although the local economy in Southern California still seems dismal, according to various economic indices, it may finally be on the mend. From an L.A. Times story:
Signs are increasing that an economic turnaround has begun in Southern California, even as residents and businesses continue to struggle in the worst downturn in decades.
The state's exports are growing as overseas consumers, especially those in Asia, are demanding computers, electronics and agricultural products from California. Tourists are starting to return to the region's hotels and beaches. And home prices appear to be stabilizing in some of the Southland's hardest-hit markets...
In California, a new report by Comerica Bank showed positive trends in the state's economy in July, for a fourth straight month. Cal State Fullerton says its indicator for Southland economic growth was positive last month for the first time in nine quarters.
Economists are also optimistic about California's long-term prospects in areas such as green technology, medical research and international trade. In the short term, however, its rebound could lag behind the national recovery.
The state's unemployment rate reached 11.9% in July, well above the national rate of 9.4%. Joblessness in California will continue to rise through the end of 2009, peaking in the fourth quarter at 12.2%, according to UCLA economists, who predict that job growth won't resume until late 2010.
The state's budget woes also will be a major drag. California is spending less on healthcare, education and prisons. It's cutting jobs and furloughing workers. That means less money to stimulate the economy.
The state's recovery will also be hindered by its historic reliance on the housing industry, which created tens of thousands of jobs in construction and financial services during the boom. Now many of those positions have vanished...
Southern California home sales were up 11% in August from a year earlier, while median prices rose for the fourth straight month to $275,000, up from a bottom of $247,000 in April, according to figures released by MDA DataQuick. Housing prices are unlikely to take another big tumble, Comerica economist Dana Johnson said. "The housing sector seems to have made the huge adjustment it needed to make," he said. "It doesn't look like there's terrible further adjustments to follow."
Builders are working through their inventories of unsold homes, which means they'll soon have to start building again, said Nancy Sidhu, chief economist for the L.A. County Economic Development Corp.
Still, a surge in foreclosures could hamper the state's housing recovery. In July, about 1 in 10 Californians with a home loan was in default, according to First American CoreLogic. It's another reason economists predict the state's comeback won't be a quick one...
The long-term prognosis for California, however, is optimistic, said Nickelsburg of the Anderson Forecast. The state will benefit from federal stimulus money now being channeled into research in medical innovation and green technology. Beyond 2010, Nickelsburg said, California could grow faster than the rest of the country.
Fledgling industries such as battery technology, wind power and the computerization of medical records could propel new growth in the state, said Levy of the Center for Continuing Study of the California Economy.
California already leads the nation in patent registration for green technology, according to Next 10, a nonprofit research group in Palo Alto. And it attracted a record investment in renewable energy and clean technology last year, despite the state's deep downturn.
Throughout the recession, the health and education sectors have been immune to widespread job losses, and those sectors will probably continue to generate growth, economists said.
As people reach retirement age, they'll be drawn to the weather and lifestyle of California, coming here for healthcare, said economist Sung Won Sohn of Cal State Channel Islands in Camarillo.
Wednesday, September 16, 2009
Economic rebound in Southern California?
Wednesday, March 25, 2009
The future of the the California economy
The 1990s recession in Southern California was bad -- so bad, in fact, that people were wondering if the state's economy would ever fully rebound. I'm now hearing those voices rise again, although this time the reasons are more numerous. From a column by Steve Perlstein at The Washington Post:
The recession hit here earlier and harder than the rest of the country -- the statewide unemployment rate topped 10 percent last month -- and chances are it will linger here longer.
The severe downturn reflects the region's central role in the Bubble Economy.
As the headquarters for Countrywide Financial, Washington Mutual, New Century Financial and IndyMac, along with several of the nation's largest home builders, Southern California is ground zero for the mortgage crisis and the residential real estate bust.
As the capital of conspicuous consumption, its heavy reliance on auto sales, fashion, electronics and entertainment is now out of sync with the country's new frugality.
And as the gateway through which a majority of the country's imports flowed from Asia to American homes and businesses, its ports, warehouses and distribution channels, which once strained to keep up with the volume, now find themselves with large amounts of unused capacity.
More significantly, the receding economic tide has revealed serious structural problems and challenges in key sectors. The music, entertainment and electronic gaming industries are being turned upside down by the Internet.
The real estate industry is bumping up against the limits of population growth and exurban sprawl. And state and local governments that have long financed themselves by pushing costs off into the future have finally met their day of reckoning...
It is hard to overstate how reliant the Southern California economy has always been on population growth to drive its economic growth -- in oversimplified terms, building houses for the next wave of home builders...
But in recent years, this perpetual growth machine has pretty much run out of steam as residents old and new confronted the realities of two-hour commutes, bad air, a shortage of water and a backlash against illegal immigration.
Moreover, without the steady growth in tax revenue that came with population growth, the Ponzi scheme that passes for public finance in California was suddenly and painfully revealed. Much of the blame lies with public employee unions and a handful of other special-interest groups that have essentially hijacked political control of state and local governments.
Now, despite decades of high taxes and rapid growth, state and local governments find that they not only don't have the revenue to provide even basic services, but are saddled with hundreds of billions of dollars in unfunded pension liabilities and infrastructure needs...
Clearly, no matter how well the economy rebounds, the future cannot be business as usual.
