California Apparel News

California’s economy is in for a long slog that won’t see any improvement until the end of 2012, when conditions will begin to improve.

That was the word from the UCLA Anderson Forecast, published by the UCLA Anderson School of Management and released Sept. 20. The forecast is for the third quarter of 2011 through the fourth quarter of 2013.

With ominous chapter headings such as “No Recession Alarm, but Not Much Hope for the Unemployed,” the report had bad news for both the state and the nation.

David Shulman, senior economist with the UCLA Anderson Forecast, noted that while the nation has not gone back into a recession, “There is certainly no forward momentum, and our outlook is far worse than just three months ago.”

The findings of the report do not predict a subsequent new recession because the three sectors that would normally put the economy into recession—housing, consumer durables and inventories—are already depressed.

One tiny bright spot was California manufacturing, which is growing but not by leaps and bounds, according to senior economist Jerry Nickelsburg, who wrote the California section of the report. Apparel manufacturing grew while many other traditional growth sectors—such as ambulatory healthcare, private colleges and Internet service providers—shrank. Manufacturing of computers, electronics and machinery and much of the information sector continued to grow while finance, legal and accounting services remained in flux.

California’s unemployment rate stands at 12.1 percent, where it has been stubbornly stuck for months now, and is the second highest in the country, after Nevada. Employment growth in the state won’t make much headway next year, with job growth increasing at only 0.7 percent next year and 2.1 percent in 2013. The state’s unemployment rate will remain around 12 percent until 2014, when it is expected to drop to single digits.

In comparison, August’s national unemployment rate was reported at 9.1 percent and is predicted to rise soon to 9.5 percent. “In terms of the labor market, we are not in an economic recovery, but rather we remain mired in one long slump,” Shulman observed.

On the national front, there has been some economic growth with modest gains in exports, consumption, equipment and software investment. UCLA’s economists had hoped that strong export growth would help generate a recovery, but because of weak exports to Europe and declines in Canada and Japan’s real gross domestic product, exports aren’t growing as fast as before. “As a result, real exports are now expected to run $50 [billion] to $60 billion a year below what we previously thought in 2012 and 2013,” the report said.

The forecast now expects economic growth to gradually rebound in mid-2012 with the economy growing at a rate of 2.5 percent to 3 percent. The big risk is that fiscal and monetary problems in Europe could spill over into a generalized credit crisis, possibly triggering a global recession.

Earlier UCLA Anderson forecasts had predicted that California’s economy would grow faster than the rest of the country, but the economists now say this will likely be hindered by the significant economic challenges forecast for the United States.

—Deidre Crawford