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Bleak forecast for Valley recession recovery
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Recovery from the recently-ended recession will be slower than previously projected, according to the latest report from the Business Forecasting Center at the University of the Pacific.

The newest projections, released Oct. 21, show California’s unemployment rate remaining above 10 percent for three years – a significantly longer downturn than forecast in July, which saw statewide unemployment falling to 9.7 percent by 2012.

The downward revision came on the heels of a disappointing third quarter, which saw an anticipated recovery in consumer spending but did not reflect expected gains in exports and homebuilding.

“Although a double-dip into a new recession still seems unlikely,” the report reads, “California is likely to experience below 3 percent growth through 2013 which makes our forecast for a long, slow recovery even longer and slower than before.”

In the Modesto study area, which includes Turlock, the recovery is projected to be slower yet. Unemployment rates are projected to rise from 17.5 percent in 2010 to a high of 17.8 percent in 2011 before gradually recovering to 17.6 percent in 2012 and 16.4 percent in 2013.

“As in other forecast regions, unemployment will remain stubbornly high much longer than we had anticipated previously,” the report reads.

The forecast looks as far ahead as 2015, at which time the Modesto unemployment rate will still remain above pre-recession levels, according to the report.

The Modesto area is projected to have the second highest unemployment rates in Northern California, with the Merced County area topping the list. Merced County’s unemployment rate will rise from 18.9 percent this year to 19.4 percent for 2011 and 2012, before dropping to 18.2 percent in 2013.

The Central Valley’s projected slow recovery is due to reduced construction and state budget cuts, according to the Business Forecasting Center. Better than expected conditions in agriculture can’t counteract cuts to schools and local government and record lows in homebuilding.

Last year was the worst on record for housing starts, with just 36,000 unit breaking ground. A slight recovery to 43,000 new housing starts in 2010, projected by the Business Forecasting Center, would still be the second lowest in the last 50 years. Multi-family construction is expected to return to pre-recession levels in the next two years, while single-family construction will lag.

More than 400,000 jobs have been lost in the hard-hit construction sector since a peak in winter 2006. But the sector should recover after 2011, the report finds, averaging 9 percent job growth from 2012 through 2015.

Most segments are projected to make a more gradual recovery, with manufacturing, retail, and state and local government employment expected to make modest gains. Professional and scientific service jobs are the only other strong growth area, projected up 5 percent over the next year.

San Jose is the only city in Northern California found to be clearly recovering, according to the report. The area will see a 3 percent increase in jobs for 2011 and 2012, which should help jumpstart the economy of neighboring communities.

To contact Alex Cantatore, e-mail or call 634-9141 ext. 2005.