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Construction biggest obstacle to Central Valley recovery, finds report

Technology, ag industries on the rise

POSTED August 2, 2011 10:56 p.m.

California’s economic outlook is still grim, but remains stable according to the University of the Pacific Business Forecasting Center.

The center’s July report continues to forecast a slow recovery, with California’s unemployment rate remaining above 10 percent through the end of 2013.

“Local governments, schools and real estate remain depressed,” said Jeff Michael, director of the forecasting center, “and those are the sectors that drive the middle class and consumer spending in the Central Valley.”

Similarly, construction and finance “continue to disappoint already low expectations,” according to the report.

Some bright spots are to be found. The technology sector is experiencing strong growth, driving state tax revenues and San Jose’s recovery in the process, while tourism and agriculture are recovering as well.

 Construction is projected to drive job growth over the next four years, with 210,600 new jobs representing almost 16 percent of California’s nonfarm job growth. The recovery would represent 54 percent of construction jobs lost since a winter 2006 peak.

New housing starts will begin to surge again in 2012, the forecasting center finds, surpassing 74,000 new units statewide. In 2015, 158,900 new homes will be built, more than four times 2010’s 39,400 new homes.

Despite the recovery, both residential and non residential construction activity remain down in the San Joaquin Valley. The Valley is the only region in the state where non-residential construction failed to surpass 2010 figures through the first half of 2011, per the report.

The poor construction performance in the Valley is emblematic of the region’s dismal overall recovery.  Most positive signs – atypically strong employment indicators in manufacturing, for example – have been found to be statistical errors, the center said.

In Stanislaus County, 0.8 percent of jobs were lost in 2011, with near 17 percent of the population unemployed. Stanislaus County unemployment is projected to remain higher than any other Valley county, except Merced, through 2014.

The center suggests Stanislaus County’s unemployment rates will recover by 1.7 percent in 2012, driven by new jobs in professional and business services, education and health services, and manufacturing. But the unemployment rate is projected to remain above 13 percent through 2015, while statewide unemployment is projected to recover to 8.7 percent.

The few strong economic sectors – agriculture, food and beverage manufacturing, transportation, and warehousing – simply haven’t produced enough jobs to make up for reductions elsewhere, the center said.

“These modest gains have been more than offset by reductions to local governments and very weak performance in retail and other service areas driven by consumer spending,” the report states. “Five years after the housing bubble burst, construction is still sinking in the San Joaquin Valley and remains the biggest obstacle to recovery.”

To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.

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