STOCKTON – California will experience a 4th year of sluggish recovery in 2013, according to the latest projection from the Business Forecasting Center at the University of the Pacific. The Center forecasts real gross state product will grow 2.2% in 2013, a similar pace to the three previous years, before accelerating to 3% in 2014 and near 4% in 2015.
California job growth will remain steady at about a 2% pace over the next few years, marginally faster than the U.S., an expected outcome given the depth of California’s recession. “California’s recovery is tracking the U.S.,” said Jeff Michael, Director of the Business Forecasting Center. “There is no evidence that the California economy is significantly outperforming the U.S. economy.”
While the overall state is tracking the national economy, the Bay Area is definitely surpassing it. Employment has already recovered to pre-recession levels in the San Jose and San Francisco metro areas. The Bay Area will continue to lead the recovery in 2013 with both the San Francisco and Oakland MSAs posting job growth over 3%, and the San Jose MSA just below 3%. In 2014, Bay Area growth will slow to below 2% as the regional economy fully recovers and high housing costs and other constraints to growth become more binding.
Beginning in 2014, the fastest pace of job growth will shift inland to the Sacramento and Stockton MSAs. The forecast projects over 2% job growth primarily driven by construction, the improving real estate market, and gradual recoveries in state and local government.
Highlights of the February 2013 California Forecast
- California will experience a 4th year of sluggish recovery in 2013. We forecast real gross state product will grow 2.2% in 2013, a similar pace to the three previous years. Growth will accelerate to 3% in 2014 and near 4% in 2015.
- California unemployment rate has fallen below 10%, but we expect the improvement in the unemployment rate to slow as labor force growth increases. The state unemployment rate is not projected to remain above 9% through all of 2013, and not drop below 8% until 2015.
- Payroll jobs are projected to grow at a 2% rate for the next four years. Non-farm employment is forecast to recover its pre-recession peak in the second half of 2015.
- Single-family housing starts will begin to recover in 2013 to 40,000 units, and steadily increase to over 100,000 units in 2016. Multi-family housing starts will reach pre-recession levels of 40,000 in 2013, and could increase to 70,000 units by 2016.
- With the passage of Proposition 30, state and local government employment will stabilize in 2013. State and local government employment will begin growing again later this year and by 2017 will have recovered 100,000 of the 170,000 jobs lost in the recession.
- About 250,000 new Construction jobs are expected to be created over the next four years, about one-quarter of the one million jobs California will add by 2016. Despite leading the state in job growth over the next four years, there will still be 100,000 fewer Construction jobs than before the recession.
- Manufacturing employment is expected to be flat in 2013, after a slight decrease in 2012.
- The Health Services sector was the only private sector to experience consistent job growth throughout the recession, adding 27,500 jobs per year throughout the recession. Health care employment will continue consistent gains in 2013.
- Professional Scientific & Technical Services led all industries in job growth in 2011 and had recovered to pre-recession employment levels by 2012. This sector will continue its strong growth and add roughly 40,000 jobs in 2013.
- Santa Cruz Short Term Outlook
- Nonfarm employment growth in the Santa Cruz MSA is expected to drop 0.7% in 2013. The fourth quarter of 2012 brought a 2.7% increase in employment for Santa Cruz and it is anticipated that the first quarter of 2013 will have a 0.4% increase in employment. The second and third quarters, however, will have employment decreases of 2.5% and 1.0%. Employment is projected to increase again at a moderate rate beginning 2014.
- While most sectors will decrease in jobs for the year, the sectors with an increase in employment are Manufacturing, Construction & Mining, Information, and State & Local Government. The leader in job growth in 2013 is expected to be Construction & Mining followed by Manufacturing with employment increases of 8.0% and 3.8%.
- Although there is a decrease in employment, real personal income for the Santa Cruz MSA is expected to increase at a small rate of 0.7% to $11.7 Billion in 2013. Starting 2014, real personal income will grow on average 2.4% for the remainder of the forecast horizon bringing income to $12.9 Billion in 2017.
- Population in Santa Cruz is expected to maintain its 0.6% growth rate in 2013. The remaining forecast shows that the increase in population will continue to maintain its 0.5-0.6% growth rate until 2017. Even with an increase in labor force of 1.9% and a decrease in employment of 0.7%, unemployment in Santa Cruz is still expected to drop to 9.9% in 2013 compared to 10.9% in 2012. As job growth picks up in the upcoming years, unemployment will continue to decline until it reaches 6.6% in 2017.
The Business Forecasting Center at the University of the Pacific was founded in 2004. Housed in the Eberhardt School of Business, the Center produces quarterly economic forecasts of California and 10 metropolitan areas in Northern and Central California. For more information, visit http://forecast.pacific.edu/