WESTWOOD (CBSLA.com) — A sluggish economic recovery and the passage of Proposition 30 by California voters are among the factors that may keep the state unemployment rate from dropping next year, according to a forecast released Wednesday.

KNX 1070’s Pete Demetriou reports economists at UCLA’s Anderson School of Business are preparing for a sustained period of lower economic growth throughout the state for the foreseeable future.

Jerry Nickelsburg, senior economist with the Anderson School Forecast said he expects California’s economy to produce growth rates between 1.4 percent to 2.2 percent even with an modest recovery in the job market.

He cited “significant headwinds” in the global economy next year as being major factors in preventing the jobless rate to fall below 8.5 percent statewide.

“We’ve got a recession in Europe that might deepen, slowing growth in China, recession in Japan,” said Nickelsburg. “As well, the U.S. consumer is really increasing their purchases of goods and services at a real slow rate.”

Tax increases – courtesy of the passage of Proposition 30 by voters in November – are expected to forestall cuts to vital programs, but Nickelsburg warns any revenue collected by the state won’t address long-term issues.

“State government is funded on a highly volatile income stream, namely the income of the upper income earners in California,” Nickelsburg said. “Prop. 30 increases the dependence on those income earners for funding state government.”

The looming “fiscal cliff” facing lawmakers in Washington could also have a disastrous effect on the local economy, according to senior economist David Shulman.

Any failure by Congress and President Barack Obama to reach a compromise on how to address the pending end of previously enacted tax cuts and automatic spending cuts totaling about $600 billion – about 4 percent of the economy – by early next year could have a major impact both locally and nationally, according to Shulman.

“If we go over the cliff for a couple of months, we’ll probably have a nasty recession,” Shulman said. “CBO says two negative quarters….my sense it’ll be much worse than what they’re talking about.”

Click here (PDF) to read the entire December UCLA Anderson Forecast.


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