Posted : 2012-04-10 17:09
Updated : 2012-04-10 17:09

Experts at odds on future of Calif. economy

By Dan Walters

Jerry Nickelsburg and Bill Watkins are two university economists with doctorates who specialize in charting and forecasting California's $2 trillion economy.

That's just about all they have in common.

Simultaneously, Nickelsburg and Watkins issued analyses last month of California's prospects for recovery from its historically deep recession.

Nickelsburg, who works at UCLA's Anderson Forecast, expects "continued, slow steady gains in employment through 2012" with unemployment dropping into single digits in late 2013.

Watkins, who runs a graduate economics program at California Lutheran University, a short drive up the coast from UCLA, contended that "California's economic future is lackluster at best" and that most of the state "will continue to suffer something that feels very much like a continued recession."

If two highly qualified professional economists cannot agree where California's economy is headed, how can the rest of us ― not to mention those we elect to political office ― view the future with any degree of certainty? We can't, as a recent poll conducted by the University of Southern California and the Los Angeles Times indicates.

The voter poll found that 39 percent believe the state's economy has bottomed out and is beginning to improve, 24 percent believe it's hit bottom but is not yet improving, and 33 percent agree that it hasn't reached the bottom yet and will still get worse.

In part, the conflicts among economists and voters may reflect the disparities within the state. As Watkins points out, the Bay Area and San Diego are showing the definite signs of economic life that other regions are not.

The Legislature's budget analyst, another entity that charts California's economy, also reflects that ambivalence in its most recent economic report. It sees employment increasing "at a healthy clip" but says "unemployment levels remain stubbornly high."

Legislative analyst Mac Taylor and Gov. Jerry Brown's Department of Finance are billions of dollars apart on their revenue forecasts because they disagree not only on the direction of the economy but on how well high-income taxpayers will be doing in stocks and other capital markets.

There are sharp disagreements, too, on what ― if anything ― will power the state out of recession.

Brown and other Democrats tout the so-called "green economy" but a new federal Bureau of Labor Statistics report reveals that just 2.3 percent of the state's employment is in "green goods and services."

Republicans and business leaders, meanwhile, say that California's tax and regulatory policies discourage the job-creating investment it needs, echoing economist Watkins' contention that "an excessively expensive regulatory regime" is holding its economy back.

Dan Walters is a columnist for Sacramento Bee.
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