Report predicts trouble for Calif. economy


This forecast is from the same group which correctly predicted the current housing crisis we are in - so they have credibility. The forecast is for one-and-a-half to two years more of shaky financial times in the golden state.

The report predicts a downturn in the California economy all the way into 2010. It says government employment, down by 6,000 jobs from July to August, will continue to fall - as property tax collections drop because of lower property values. It predicts job losses in clothing, electronics and building and says high tech manufacturing could take a hit as well. It says increased government intervention in the economy will spur inflation and result in higher taxes. Terry Connelly is Dean of the Business School at Golden Gate University. He says the report greatly underestimates California's leadership role in biotech and alternative energy.

"Investors are already out front on that issue. And where the Congress, at least this week, is showing signs of moving forward to extend in a materially important way - the tax incentives for growth in those industries," said Connelly.

The report says the housing mess is the root cause, leading to job losses in construction and finance -which lead to less consumer spending. Combine that with reduced property values, you get less state revenue. Now the report says housing prices will bottom out next year, but the overall economy won't follow until months after that.

Former eBay CEO Meg Whitman says if you really want to change things in California, change the business climate.

"California needs to rededicate itself to being an incubator of innovation and entrepreneurship. The best way to do that is to lift the tax burden on business and revamp government regulation to support business and job creation," said Whitman.

For all the darkness in that report - the word 'recession' is not mentioned. But, Dean Connelly from Golden Gate University says, without some kind of loosening of credit in the United States, we could very well see a deep recession, or even a depression.

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