Economic Gains in 2010, Recovery Expected in 2011

If 2010 were represented in a color trend forecast, it would be light gray, compared with 2009’s black, and 2011 would be pale blue.

Pundits are pronouncing 2010 as the year the economy brightens as consumers become more confident about their financial future. But with unemployment figures remaining high, nothing will look rosy until 2011.

“We will muddle through for the next half year, and then we will see some things start to happen,” predicted Jerry Nickelsburg, senior economist with the UCLA Anderson Forecast, the University of California, Los Angeles group that makes economic reviews and forecasts.

Economic observers were given a dose of good news in early April, when retail sales results for March went off the charts. Stores open at least one year had same-store sales that ticked up 9.1 percent. Apparel sellers showed an 11.8 percent gain, and discounters weren’t far behind, with a 10.1 percent jump.

But one of the best retail sales results in a decade wasn’t cause for high-fives yet. Michael Niemira, chief economist for the International Council of Shopping Centers, noted the bulk of Easter-related sales fell into March’s numbers. So the true test of retail recovery will be to calculate the March and April sales results together.

Retail sales were just one of several economic indicators pointing in a positive direction.

New-home permits in Los Angeles County totaled 3,671 during the first two months of this year, up 43 percent from last year. The California Building Industry Association is predicting that 52,000 units, which include single-family homes and apartments, will be built in 2010, up from a record low of 36,327 in 2009.

“Inventory is low in coastal California; prices are going up, and almost nothing has been built,” Nickelsburg said. “What you have is the makings of a market that is ready to start moving.”

But many consumers are still wary about making large purchases until they see more signs of economic health and stability.

Nickelsburg is predicting that real personal income will grow only slightly this year at 1.3 percent, compared with an average of 2.8 percent. Income growth will rise 3.7 percent in 2011 and 4.5 percent in 2012.All about jobs

Stubbornly high unemployment figures will be with us into next year, economists said, putting a damper on any fast-growth predictions. Public entities, such as the city of Los Angeles and the Los Angeles Unified School District, are contemplating layoffs as public coffers hit bottom.

“Unemployment is going to go down grudgingly,” said Jack Kyser, an economist with the Los Angeles County Economic Development Corp.

“In the state, you have 803,000 people who have been out of work for 27 weeks or more.”

In February, the state unemployment rate hit a recent high of 12.5 percent while the national unemployment rate fared better and crept down to 9.7 percent after rising to 10 percent at the end of last year.

“Employment is the last thing that improves,” said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University in Orange, Calif. “Even if sales pick up 10 to 20 percent, firms and small businesses are not going to rush out and hire people. They want to make sure this thing is real.”

But the employment picture is getting brighter with facts such as this: The state’s average weekly manufacturing hours inched up to 39.5 hours, a tad better than last year’s 39.3.

A recent Chapman University survey of California’s purchasing managers points to a continued expansion in manufacturing in the second quarter of 2010. The index is at its highest since the fourth quarter of 2005 with the composite index at 62 compared with 45.1 during the same period last year. Anything over 50 means growth.

Industries expected to grow first are health care, private education and professional business services that include accountants, attorneys and computer programmers.

Sectors that will lag behind are financial services, including the mortgage and banking industries, and construction.First in, first out

When California’s housing market and subprime market collapsed in 2008, it made the state one of the hardest hit by the economy’s tailspin. But economists are predicting that the Golden State will be one of the first to recuperate because economic growth is going to be led by exports. And California is a major exporter of goods in the area of agriculture, computers, electronics and chemicals.

And pent-up spending by U.S. consumers is going to mean more imports from overseas, with more than 40 percent of all cargo-container traffic going through the ports of Los Angeles and Long Beach.

The National Retail Federation predicts that retail container traffic at the nation’s ports will be up 8 percent in April compared with the same month last year. In addition, solid increases are expected to continue through the summer. “We expect these numbers to continue to climb as merchants and their customers move away from the recession and back toward normal shopping habits,” said the NRF’s Jonathan Gold, who noted that June cargo traffic is predicted to rise 17 percent and July will be up 12 percent.

Already, that is being seen in Southern California. The Port of Long Beach saw solid increases in February, with cargo container traffic up 30 percent over last year. Next door at the Port of Los Angeles, cargo container traffic also had impressive gains of 27 percent in February.

“As consumers start spending and imports go up, that creates jobs in California because we are the import and redistribution center [in the United States],” UCLA’s Nickelsburg said.

Another boon for California is its technology industry, which comprises computer and software companies. “We had an extraordinary cutback on business equipment and software during the recession,” Nickelsburg added. “Now companies are starting to buy again—computers, electronics and software that California makes.”