California may begin to outperform nation’s economy in 2011, report says

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It’s pretty clear that California is currently in worse shape than the rest of the nation. Budget issues aside, the state’s unemployment rate, at 12.6%, is 2.7 percentage points higher than the nation’s. In March, the state’s unemployment rate was 2.9 percentage points higher than the nation’s, setting a record difference.

But an economic brief released Tuesday by Comerica Bank suggests that California could begin to outperform the nation next year.

“California tends to be more cyclically sensitive than the national economy, suffering more in downturns but growing more rapidly during expansions,” wrote economist Dana Johnson in the research brief.

The state’s growth will be led, surprisingly, by the housing sector, Johnson said. Home prices are rising, which means people have more incentive to stay in their homes. The inventory of mortgage foreclosures is dropping in California, while it’s still rising nationally.

Home-building is traditionally a contributor to growth, but it hasn’t been strong yet in this recovery, which is partially why California is lagging. But because California’s housing sector is balancing more rapidly than the rest of the nation, the state could be in better shape next year, he said.

“The odds are growing that later this year or early in 2011, the state will get a bigger boost from homebuilding and could begin outperforming national trends,” Johnson wrote.
-- Alana Semuels