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Friday, Jan 27, 2023
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Economist Has Grim Prediction

The executive director of the California Lutheran University Center for Economic Research and Forecasting (CERF), predicts the U.S. economy will recover in 2010, with California following behind in 2011 — but probably not before the state goes bankrupt. Presenting the report, entitled “United States & California Forecast,” at the university’s Thousand Oaks campus recently, Bill Watkins and his team of researchers paint a stark picture of California’s fortunes for next year. “We believe that California is now more likely to default than not,” Watkins said summarizing the portion of the report predicting bankruptcy for the state government. “If so, it could be ugly, with consequences far beyond California.” In a section of the report called “How California Went From Top of the Class to the Bottom or How We Learned to Stop Worrying and Love Malaise,” Watkins and his team declare a downhill slide has been ongoing in California since the 1960s. “(Gov.) Pat Brown’s California was dynamic and growing, enthusiastic, and infused with an attitude that anything was possible. Today’s California is anything but dynamic and growing, and much is impossible,” the report said. The good news, according to the CERF report, is that residential real estate values in California are unlikely to slide any further. “The bad news is that they are unlikely to significantly improve soon. Foreclosures are likely to remain high, and continued economic weakness will likely contribute to weak demand.” The other good news is that, while 2010 will be bad for California, according to Watkins, 2011 will usher in a recovering economy. Furthermore, he said, next year will be better for most of the rest of the United States. Then, said the report, it will be California’s turn. “We expect California’s economy to continue to contract, slowly, through the first three quarters of 2010,” said the report. “However, the contraction will be a bit less each quarter. By the fourth quarter, the state’ gross product growth could be mildly positive. Output is then likely to slowly improve, but at an improving rate, through 2011.” Job growth will lag economic activity, according to Watkins.

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