Wednesday, March 25, 2009

Forecasts: 12% Unemployment in California

by Bill McBride on 3/25/2009 11:28:00 AM

From the LA Times: UCLA Anderson Forecast: dark days (ht Brad)

UCLA economists are coming out with a new forecast today that offers a grim picture of the year ahead.

Nationwide, the unemployment rate will worsen -- peaking late next year at 10.5%. And in California, which has been battered by tumbling housing, retail and manufacturing sectors, the jobless rate will soar to 11.9% by mid-2010, the latest UCLA Anderson Forecast says.

"The national economic outlook remains bleak," wrote David Shulman, a senior economist for UCLA.

"As a result of the prolonged contraction, the economy will likely lose 7.5 million jobs peak to trough and unemployment will soar."
...
The researchers cite the unprecedented losses to U.S. balance sheets -- $9 trillion in stocks and $5.5 trillion in home values.

The financial crisis, they say, has swelled into such a global problem that national policy may be ineffectual. The United States needs its international trading partners to reverse their slowdowns and reignite the exchange of imports and exports.

Nationally, the UCLA forecasters say the economy will begin to grow slowly by the fourth quarter of this year. That's when residential construction should also begin to turn around, but exports will continue to slide downward until the beginning of 2010.
And from the Sacramento Bee: 12% jobless rate forecast for state, followed by slow recovery
California unemployment will peak at just over 12 percent late this year, setting a modern record, according to the latest forecast from the University of the Pacific.

Recovery will come slowly. Unemployment won't sink back into single digits until late 2011, or some two years after the recession is expected to officially end, according to a forecast released Tuesday by UOP.
...
At 12 percent, unemployment would be the highest since modern record-keeping began in 1976. The old record is 11 percent, reached three times in the early 1980s.
The California unemployment rate hit 10.5% in February.

In the early '80s, I remember seeing many more homeless people than now, and there were a number of "Reaganvilles" in my area (a take-off on the Hoovervilles of the Great Depression). So far this recession looks and feel less severe than the early '80s, although the unemployment rate is about the same - and forecast to go higher.