State

Valley faces long recovery

While the state's recession is over, the Central Valley economy continues to lag behind and faces a long, slow road back.

The University of the Pacific's Business Forecasting Center released its quarterly forecast Wednesday. It shows that while the state's two-year recession ended last fall, the valley has only now just bottomed out.

"We've learned the hole is a little bit deeper than we originally thought, since the 2009 downturn was exceptionally severe. That means the path out is a little bit longer," said Jeff Michael, director of the Business Forecasting Center.

For most of Northern California, that path out will take four to five years to return to normal, pre-recession conditions. Areas such as San Francisco are expected to join the already rebounding San Jose in posting stronger second half of the year comebacks.

The forecast predicts that the state's unemployment rate, which hit 12.6 percent last month, will stay at or above 12 percent through the end of the year.

Michael said the closure of the 4,700-worker New United Motor Manufacturing Inc. plant in Fremont at the end of last month should be the final significant marker of the downturn.

"We can look for improvement going forward," he said. "But I think this region is definitely moving sideways right now. I don't think we'll see any kind of real pickup until later on this year."

The unemployment rate in Stanislaus County, at 19.2 percent for March, is expected to stay about 18 percent through the end of the year. By 2011, it is forecast to reach 15.8 percent and by 2012 is predicted to drop to 13.7 percent.

Construction continues to be the worst-hit sector through the recession, with more than 400,000 jobs lost statewide and another 12 percent decline predicted by midyear.

Going forward, the report says, state and local governments — including public schools — will see the most job losses and continued cuts.

Other key statewide findings:

Since peaking at 15.2 million jobs in summer 2007, the state has lost 1.4 million jobs.

It will take more than four years to recover from this 9 percent decline.

The state's gross product (total goods and services adjusted for inflation) will average a modest 3 percent growth over the next four years.

Manufacturing is leading the early stages of the recovery and could be the first segment of the economy to show year-over-year job growth in 2011.

Retail jobs have bottomed out after a more than 10 percent decline, but will remain flat over the next year.

Retail sales will not recover their 2007 level until 2011.

Housing starts are not expected to be back to pre-2007 levels until 2013.

Bee staff writer Marijke Rowland can be reached at mrowland@modbee.com or 578-2284.

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