Tech crisis lingers in California
By Lisa Leff
Associated Press
LOS ANGELES — California's weak economy should begin showing early signs of renewed vigor during the first half of 2003, but still faces a long and painful recovery, according to a respected economic forecast.
Employment, personal income and consumer spending are all expected to show slim increases in 2003 following two years of recession, according to the quarterly University of California, Los Angeles, Anderson Forecast.
At the same time, the state government's unresolved budget shortfall, worsened by continuing fallout from the collapse of the information technology and telecommunications industries, means that California won't rebound as quickly as the rest of the nation.
"The tech crisis affects us all to the extent we are all consumers of government services, and we haven't seen the other shoe drop there. It's going to be unpleasant," said economist Tom Lieser, the California study's author, predicting tax increases and reduced public services for the year to come.
A companion UCLA study on the U.S. economy forecasts a similarly "disappointing" picture in terms of jobs and consumer spending until mid-2003 as the nation returns to a phase of "normal" growth without an Internet engine to fuel "another period of excess."
According to Lieser's forecast, the recession that came to California in early 2001 remained in effect during the third quarter of this year. Exports declined after posting a brief, second-quarter rise, while personal income and state revenues continued to fall in the face of higher prices.
Both sour notes stem from the same source — the bursting of the high-tech bubble that had created paper millionaires and enriched the state during the 1990s. The loss of so many high-paying jobs has left California, even with a relatively positive employment picture, "much worse off in an income comparison with the nation," the UCLA study states.
When adjusted for inflation, personal income is expected to decline this year by 1.3 percent before growing by a modest 0.7 percent in 2003 and a more robust 2.6 percent in 2004, according to the report.
Amid the ongoing slump, however, UCLA economists detected evidence of a fledgling recovery that indicates the state's economic woes may already have bottomed out.
While California's unemployment rate held steady at 6.4 percent during the third quarter, joblessness has varied considerably by industry and by region, Lieser said.
Both the San Diego and Riverside-San Bernardino metro areas gained jobs, for instance, while the San Francisco Bay region kept shedding them.
"Usually, counties tend to fall more or less in line. These numbers just show how different the high-tech region has been from the others. It boomed very strongly and then they went bust," Lieser said.
And despite the high-tech industry's bust, automotive sales, residential real estate, and education have remained strong, although Lieser noted that next year could see a softening of those industries as well.
"The budget reflects the weaknesses we have already had, and those will be with us for a while. At the same time, there have been some offsets," Lieser said.
Recent trends in consumer spending have followed similar patterns. Double-digit declines in taxable sales have plagued the San Francisco Bay area, while Southern California counties have seen positive gains.
