World's eighth-largest economy is expected to see unemployment at 10% or higher through late 2011, says UCLA Anderson Forecast group.
California will lag the United States as the country recovers from a deep recession, with normal growth in the most populous U.S. state not seen resuming until 2011, the UCLA Anderson Forecast group said Wednesday.
Although there are signs now of a recovery beginning to take hold in California, the state's unemployment rate is expected to stay above 10% until late in 2011, the forecast group said in a report.
The report comes a day after Federal Reserve Chairman Ben Bernanke said that the worst U.S. recession since the Great Depression was probably over, though he warned that recovery and job creation would be slow.
California's economy, the world's eighth largest, is suffering record unemployment as it staggers under the combined weight of the recession, a sharp drop in consumer spending, reduced trade flows, financial market turmoil, the mortgage crisis and a prolonged housing slump.
"Overall, the outlook for the balance of the year is for little to no growth," UCLA Anderson Forecast said in its report. "The economy will begin to pick up some tail winds towards the end of 2010 and by the beginning of 2011 we will get off the tarmac and begin to grow at more normal levels....MORE
California is betting that a broad marketing campaign and deep bench of bond brokers will help it get a good deal on the $8.8 billion in securities it plans to sell next week in what would be the biggest short-term municipal bond deal on record.
The state is selling revenue anticipation notes maturing in June 2010 to meet its cash-flow needs throughout its fiscal 2009-2010 year. These notes are considered far less risky than typical municipal bonds because they are so short-term and payable from available money in the state's general fund. Still, the notes are likely to carry yields that are several times higher than recent note issues.
After a rancorous and highly-publicized budget battle in the legislature and governor's office, investors are likely to continue demanding relatively high yields to hold the state's debt, even for a short period. California carries the lowest ratings on its long-term debt in the nation.
"They need to do the marketing to garner interest, given the state's recent financial history," said Gary Pollack, head of fixed-income trading at Deutsche Bank's private-wealth management unit....MORE
Counting on Mom and Pop to bail out the kids in Sacramento is just sad.