California's job growth will slow later this year and into next year as the real estate market cools and related job sectors take employment hits, according to the quarterly UCLA Anderson Economic Forecast released Wednesday.
The forecast calls for the state's employment growth to slow from the current 2 percent to about 1 percent, or about 150,000 jobs per year. This will mirror a nationwide slowdown in which real gross domestic product growth will drop to 2.4 percent next year from 3.2 percent this year.
The main culprit on both fronts: a slowdown in the housing market. In California, the Anderson forecast predicts home price appreciation will drop to a 6 percent by the end of this year, compared to the 25 percent annual gains experienced earlier in the decade. In 2007, the state's home price picture will be "flat."
This in turn will lead to a sharp drop in the number of housing units sold (a trend that's already been under way for the past six months) from 530,000 units today to 390,000 in 2007.
"The impact on the real estate and mortgage industries will be substantial," states report author and UCLA Anderson senior economist Christopher Thornberg in the forecast. With broker commissions sliding, the spillover effect would be felt on the coffers of state and local governments.
Construction employment is at greatest risk from any slowdown in housing, Thornberg said. So far, no other sector of commercial construction appears ready to take up the slack, nor will public works projects after this month's fizzling of a massive state infrastructure bond.
While a bond may get on the November ballot, it will probably be far more modest than Gov. Arnold Schwarzenegger originally planned, with a lot less kick for new job creation, the report said.
But unlike in 1991, Thornberg said in the report that the state's economy is much better poised to withstand a slowdown in housing. That's because there is little chance of a more widespread recession leading to a substantial loss of employment in the local economy. "There is no evidence of this possibility at this point in time," the forecast concludes.
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