UCLA Anderson Forecast: U.S. recovery a long, slow climb; Calif. recovery weaker than nation’s

The forecast is for a “homeless” recovery, that is, an economic recovery without a lot of new home construction because of the huge overhang of existing and future foreclosed homes. The idea is that the huge supply of foreclosures will steal some of the buyers from new homes. Without a strong rebound in new home construction the economy won’t have a strong rebound either. Thus the “homeless” recovery with persistently high unemployment.

Leamer explains that significant reductions in the unemployment rate require real gross domestic product (GDP) growth in the 5.0 percent to 6.0 percent range. Normal GDP growth is 3.0 percent, enough to sustain unemployment levels, but not strong enough to put Americans back to work…

The forecast for GDP growth this year is 3.4 percent, followed by 2.4 percent in 2011 and 2.8 percent in 2012, well below the 5.0 percent growth of previous recoveries and even a bit below the 3.0 percent long-term normal growth. With this weak economic growth comes a weak labor market, and unemployment slowly declines to 8.6 percent by 2012.

For California specifically, the report forecasts the state “will grow slower than the U.S. and a slow recovery in jobs will leave unemployment at 12.1% for the year.” Job creation won’t be enough to push unemployment below 10% until 2012.

A weak California economy isn’t good for Arizona’s economy but if we end up growing faster than California, that would at least tend to attract some California businesses to Arizona.