California’s economic doldrums to continue until mid-2011, UCLA forecast says

The malaise that has settled over the California economy will not lift until the middle of next year, according to a forecast to be released Wednesday by the UCLA Anderson School of Business.

The state’s unemployment rate will average 12.2% for 2010 and will remain in double digits until the fourth quarter of 2012, the forecast said. That’s a weaker showing than UCLA economists had anticipated.

“California is growing slowly, but is laying the groundwork for faster growth in 2011 and 2012,” said Jerry Nickelsburg, senior economist at the UCLA Anderson Forecast.

In previous downturns, such as those related to aerospace in 1991 and technology in 2001, employment typically took four to six years to recover, he said.

Some sectors of the California economy are showing signs of recovery. Seaports are experiencing an uptick in traffic. Exports are increasing because of demand for the state’s products in Asia. Foreign tourists are returning to California, according to data on international arrivals from Los Angeles International Airport and San Francisco International Airport.

The construction sector remains a major drag on the recovery. Building permits are at record lows. But with the state’s population continuing to grow, pent-up demand for housing could lead to an increase in construction activity — and hiring — in late 2011, the forecast predicts.

“All conditions are right for residential construction to start, but we haven’t seen it yet,” Nickelsburg said.

When housing does begin to pick up, it will provide a much-needed boost to the state’s economy, he said.

Throughout the country, hiring is lagging because of uncertainty about the strength of the recovery. Employers are taking a wait-and-see attitude rather than buying new equipment or bringing on more staff, the forecasters said. The U.S. economy, which is currently expanding at a sluggish 2% annual rate, isn’t expected to approach 3% growth until late 2011.

The national unemployment rate will average 9.7% this year, UCLA forecasters said, declining to 9.6% in 2011 and 9.1% in 2012.

[email protected]