Heads-Up on California Economy

Hopefully California can push past its current political carnival and get back to doing what it takes to improve the state's overall economic and fiscal health. Here is what the latest UCLA Anderson Business School Economic Outlook has to say about California.

The continuing loss of jobs across the United States and California, particularly in the Bay Area, is unexpected. I would add this is unexpected for everybody everywhere. This bad news has been offset to some extent by more positive reports regarding profit, productivity and business investment. Moderate-at-best growth is forecasted for the national and state economies by the UCLA Anderson Forecast, in their most recent quarterly economic forecast.

In his most recent forecast report, UCLA Anderson Forecast Senior Economist Tom Lieser said, “The main difference between this California forecast and the previous one … is the incorporation of a weaker pattern for growth shown by recent data for the year 2003 to date. The employment reports for May through August in California showed a pattern of continued job loss, not unlike the decline seen for the rest of the nation.” Lieser’s analysis predicts that nonfarm payroll employment numbers will show a – 0.3% growth rate for California in 2003. This downward trend will impact 2004, which will yield a meager 1.0% growth rate, improving to 2.2% for 2005.

Personal income and taxable sales are expected to show a similar pattern of moderate economic growth. 2003 will yield a weak 3.2%, 2004 an improving 3.9% increase and 2005 a solid 5.1% boost for personal income. The taxable sales forecast looks much the same: a 1.7% gain in ’03, followed by gains of 4.1% in ’04 and 5.0% in ’05.

“The forecasts for personal income and taxable sales, particularly for 2004, do not appear to be strong enough to solve the state’s near-term budget problem through economic growth,” Lieser says. “Fiscal year 2004 growth projections are weaker than the economic assumptions underlying the fiscal year 2004 California budget,” which was approved in August.

Any gubernatorial candidates want to tackle these challenges?

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