"UCLA Forecast Predicts [California] Jobless Rate Will Be Double-Digit Through 2011."
[NOTE: THAT'S ANOTHER 2 YEARS].
"California’s jobless rate will climb to a staggering 11.9 percent from April to June next year, and double-digit unemployment will linger in the nation’s most populous state at least through 2011, according to a new economic forecast."
"The somber outlook in the quarterly Anderson Forecast from the University of California, Los Angeles, to be released today, came as the state struggles with a housing meltdown, budget crisis in Sacramento and slack consumer demand that has hurt the retail, manufacturing and trade sectors at the heart of the state economy."
"The projected jobless rate would grow to 11.9 percent from April to June 2010, and average 11.7 percent for that year. The figure stood at 10.5 percent in February. Forecasters say it will average 11 percent for 2009."
"Housing prices continue to spiral downward, putting more homeowners at risk of owing more on their homes than they are worth. "
"A rebound will hinge on consumer buying bouncing back, which would improve the demand for products from California’s factories and Asian imports that come through California ports. Construction needs to pick up, and the retail sector must grow, it concludes."
[HATE TO BE A WET BLANKET, BUT HOUSING CONSTRUCTION WILL NOT PICK UP FOR MANY YEARS BEYOND 2011 BECAUSE THERE HAS BEEN GROSS OVERBUILDING IN CALIFORNIA].
Here's a link to the Los Angeles Times report on the same forecast. http://www.latimes.com/news/la-fi-ucla-econ25-2009mar25,0,21645.story?track=rss
Also see my post here on Friday, March 6, 2009, link below. The reported unemployment rate is often about half of the "actual" unemployment rate, which includes people who have already exhausted their unemployment compensation benefits but still do not have a job, and also includes someone whose hours have been cut against their will, so they are not getting enough work hours to pay the bills. Using those figures, and the ones from this Anderson forecast, California's unemployment by next year will be 25%. Nobody knows how many illegal immigrants live in California without any "official" presence or records. But it certainly is millions, if not tens of millions. If they were previously working (which is why they come here) and now have no job, they are unemployed even though they may not be included in the "official" record of unemployment. And they usually have no cushion to hold them through any unemployment. I don't know if they can even apply for unemployment benefits. So you need to consider millions, if not tens of millions of residents of California who will be sleeping on the streets, homeless, and hungry in the near future because of the loss of jobs. The percentage of unemployed in California by next year, using these figures, could be as high as 30%.
U.S. Department of Labor Reports 8.1% "Official" Unemployment Rate, But An "Actual" Unemployment Rate of 16%.
I don't know if these people have a magic ball. But I'm pretty suspicious of forecasters. They generally get their money (and the forecasters get fame, and maybe jobs in the private sector) by skewing their reports towards one group. And when it comes to business forecasts, which side is their bread buttered on?
In other words, the deaf dumb fat guy on the radio is leading the fanatics in a new movement to destroy the U.S. and hope that President Obama cannot succeed in saving the country from economic ruin. By issuing these types of forecasts, one might argue that they might be helping by quickening the withdrawal of money from the economic engine of the U.S., the state of California. One of the reasons I'm suspicious of this group is that their website has a blurb claiming that California taxes its rich excessively. That's ridiculous. California does not tax people enough. The Terminator got elected by whipping the public into a frenzy about a $100 car tax, and he immediately hacked that baby down to nothing. Of course now the state raised it up again, because it turns out that if you have no revenue, because you slash all the taxes, then you go broke.
But on the other hand, the state of California is certainly in deep trouble. And it has in recent years relied largely on the real estate bubble to create wealth. Many of the Wall Street Criminals came to California and bought up all the coastal property. And that property will remain valuable, although likely will take a big hit. People have paid $2.0 million for a postage stamp piece of land near the ocean with a tear-down on it, and it's not likely those numbers will hold up, although coastal property will continue to have extraordinary value based on its location.
But what about the rest of the state? California has been grossly overbuilt. The fed hacked interest rates so developers could borrow money cheap and buy land, get construction loans cheap, build housing. They also, thanks to Bush's side-deal with Fox to have essentially open borders, were allowed to hire coyotes to bring truckloads of illegal immigrants into California to do all the construction work, often at $8/hour. American building trades people were earning $18-25/hour twenty years ago, but now their jobs have mostly been turned over to illegal immigrants who are paid little then deported when the tract is done. The immigrants also send much of their money back to Mexico to support their families ($25 Billion/year) instead of spending that money inside California, so the loss to the state is compounded by the use of non-resident labor.
Developers made a fortune. Banks made a fortune. Houses were sold for three times their fair value to people who could not afford to buy the home and did not qualify for the loan. Those people default when they run out of money, and/or lose their jobs. And now the state is covered with abandoned poorly-constructed track homes. Who will buy those houses?
Without real estate construction, the devastation in employment is horrifying. I know real estate brokers and mortgage loan brokers who have had no income for two years now. Of course anyone who worked in the field in construction is unemployed. The contractors are shut down. The developers are up at the country club because they got theirs. We know what the banks are doing.
An enormous industry rose up in the past 10 years in California of independent contractors working in real-estate related fields. For example, floor installers are generally independent contractors. They go either sign up with the business that sells the flooring (tile, carpets, linoleum) and do work for that business. And/or they solicit business from the community directly. Kitchen contractors who put in entirely new kitchens tend to be small independent contractors. They're all out of work now.
And of course all the defense manufacturing which used to form a solid base of jobs in California has mostly been sent elsewhere. The former well-paid defense manufacturing worker with a good income, health care and 401k ended up working in retail for $11/hour, but now they've lost those jobs too. When they can't pay their mortgage, and can't sell their homes for enough money to pay off the mortgage, they will also end up homeless.
Not much to cheer about in California. You can't eat sunshine.