State’s Economic Forecast: Very Sunny

The Internet and furniture makers may be at opposite ends of the technology spectrum, but both are contributing to job growth in California that could hit a healthy 3.7% this year, according to a UCLA report released Wednesday.

Economists from the UCLA-Anderson Forecast Project said in their report that the California economy is entering a period of strong growth that will add 1.2 million jobs within three years.

That prediction is more optimistic than earlier ones from UCLA, which pegged job growth at nearly 1 million jobs in three years. The projected 3.7% increase in California employment for 1997 is a full percentage point higher than the forecast released in March.

“It may be time to raise our sights,” Tom Lieser, associate director of the forecasting group, wrote in its latest quarterly report on the California economy.

California has been adding jobs at a rate of 4% or better over the last few quarters, and most regions around the state have shown “substantial improvement” in unemployment, the report said. The statewide unemployment rate will drop to 6.4% this year, down from 7.2% in 1996 and a 9.4% peak in 1993. In 2000, California’s projected 6% unemployment rate will nearly match the projected national rate of 5.7%.

One of the biggest drivers of the rebound is the Internet, Lieser said, which has led to an unprecedented boom in the San Francisco Bay Area. The explosive growth has created a space crunch that could present opportunities for Southern California, where vacancies are much higher, the report said.

“The problem with Southern Cal, as many Northern California entrepreneurs see it, is that Southern Cal is too far from the dense and tightly knit network of Silicon Valley suppliers and distributors on which high-tech producers depend,” Lieser said. However, a guide to technology companies in Southern California is just as thick as the companion volume for Northern California, he noted.

“A technology boom of the present dimensions is a rare event, it is a California creation, and we should all make a concerted effort to keep the business in California where it belongs,” Lieser said.

Service industries--particularly business services, film and television, engineering and management services, and amusement and recreation services--dominated the jobs picture. Construction employment reached its highest level in six years in the first quarter, the report said.

Manufacturing employment continued to increase in California, bucking the national trend. In addition to strong job gains in high-tech manufacturing and in apparel, “furniture manufacturing has staged a remarkable comeback in California,” after years of falling employment as manufacturers fled environmental restrictions, the report said.

Retail trade “appears to have emerged from the doldrums of late 1995-early 1996,” Lieser said. Financial services managed modest gains.