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Thursday, March 28, 2002

The UCLA Anderson Forecast predicted that though the threat of major job losses in the state might have faded, California is unlikely to see a sizable gain in employment or personal income until at least the second half of the year.

"By our rationale, using personal income as a barometer, there is little doubt with the recession or not, that California fell further than the national economy during the last three quarters of 2001," senior economist Tom Lieser said.

UCLA's gloomy predictions of a stubborn recession in the Golden State quickly drew a quick and sharp response from Republican gubernatorial candidate and businessman Bill Simon, who will try to oust Davis in November.

Davis' 'Three-Year Assault on Job Growth'

"Today's UCLA report that our economic recovery is faltering is more proof that the governor's three-year assault on job growth has succeeded in slowing down our economy," said Simon.

Davis could have used better news. He has had his hands full in recent months as California continues to weather the fallout from the state's electricity crisis and dot-com collapse as well as a $12 billion budget deficit that was recently re-estimated as high as $17 billion. As of April 1, information services will no longer be subject to state sales tax, which will cut off another revenue stream leading to Sacramento.

Some Environmentalist

Earlier this month, the governor postponed the phase-out of the gasoline additive MTBE for a year to avoid a possible surge in pump prices. Though claiming the need to protect the "little guy," the governor was still forced to back-pedal on a high-profile environmental protection initiative that he himself had ordered back in 1999.

Simon stated that Davis had raised energy prices and "repeatedly signed job-killing legislation.

"Meanwhile, our economy stumbles, and average people worry about their jobs, their children's schools and their high energy bills," Simon declared. "In the midst of a slow economy, you can't continue to paper over our massive budget deficit as if it isn't there. I call on Gray Davis to deal with the important issues facing our state."

According to UCLA, a growth in tech jobs could begin in the second half, just in time for the campaign's fall home stretch.

"A pickup in computer services and personnel services will bring about a resumption of growth in business services," said Lieser. "High-tech employment in electronics will add jobs at a modest pace."

According to Lieser, California was hit harder than the rest of the nation by the recent mild recession, although real estate values remained strong. That strength, however, could be tempered by rising interest rates and increases of less than 1 percent in employment and personal income.

"California's recovery will be subdued," said Lieser. "It definitely won't be what it was in the '90s."

UCLA senior economist Edward Leamer noted that spending on consumer goods and real estate remained steady nationwide, which might have prevented the recession from becoming even deeper, but also made it less likely that a surge in new spending would occur and spur the national economy.

Leamer predicted that an economic turnaround would depend largely on the growth of business capital investment, a longer-term phenomenon.

"Business investment in pursuit of technological innovations has long waves that last a decade or more," Leamer opined. "It is highly unlikely that there will be a sharp recovery of business investment in the next year or two."

Technology, in fact, has also contributed to woes in the economy by drastically increasing competition in retail and similar sectors without adding much to the bottom line of the companies.

"The Internet has fundamentally changed retail competition, affecting especially the capacity-dependent sectors including hotels, airlines, autos, PCs, wireless and so on," Leamer said. "The ability of customers to shop [online] without cost greatly increases the intensity of competition."

Copyright 2002 by United Press International.

All rights reserved.

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