California Unemployment Could Average 11.8% for 2010


California can't seem to catch a break. Amid the beginnings of a broad national economic recovery, unemployment in the cash-strapped state may average 11.8% for the year, according to projections published by the UCLA Anderson Forecast.

While 11.8% is an improvement over the current 12.5% unemployment rate in the state, it's hardly cause for celebration. Economists at the UCLA Anderson Forecast don't think California's unemployment rate will drop below the double digits until at least 2012. By contrast, they predict the national unemployment rate will come in around 9.6% at the end of 2010 and could drop to 9.1% by the end of 2011.

The national economic forecast is only modestly better, and only if you can stretch your definition of "better" to include a jobless recovery. The Anderson Forecast projects that although the national GDP will grow 2.3% in 2010; another 2.3% in 2011; and another 3.2% in 2012, payroll employment at the end of 2012 will still fall 2 million jobs below the 2007 peak.

Green Won't Be a White Knight

"The economy seems to be suffering from a bipolar disorder," the report says. "In economic terms, 'Okun's Law,' which defines a relationship between GDP growth and unemployment, appears to have broken down as productivity gains swamped the employment effects of a growing GDP."

Part of California's problem, according to the economists, is that jobs growth won't come until there's substantial growth in demand for agricultural and manufactured goods outside the state. Also, even after California stops shedding jobs, it may be some time before economic growth picks up enough to justify job creation.

One industry that isn't likely to solve California's unemployment woes? The so-called "green" industry. "For Green to be the next engine of growth [in California,] two things need to occur and neither is assured," the report says. "First, demand conditions need to be right for an explosion of green production. Second, innovation has to drive the relative price down and it has to occur in California."

Originally published