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Watkins: California recovery will be soft

By   /   Tuesday, June 29th, 2010  /   Comments Off on Watkins: California recovery will be soft

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Don’t get too excited about those little signs of economic recovery, California Lutheran University economist Bill Watkins said June 29 in his latest state and federal economic forecast presentation.

The recovery will be “soft,” especially in California, and there’s a “pretty high” chance of a double-dip recession, Watkins said during the unveiling of the CLU Center for Economic Research and Forecasting’s latest predictions.

The forecast predicts California’s unemployment will stay above 11 percent for the rest of the year and that total economic output will stay flat. The only bright spot, Watkins said, should be a slight gain in retail sales. The real estate market in California has probably bottomed out, but it won’t be bouncing back anytime soon.
 
California has had no real, sustained job growth for the past 20 years — only bubbles in technology and then real estate that masked the state’s problems, Watkins said.
 
There are three essential elements if the state is going to reverse its decline, Watkins said: it needs to reduce the uncertainty businesses face because of regulations and repeated budget crises; it needs to stop the decline of its public education system; and it needs to fix its governance system, including lifting the two-thirds requirement to pass a budget.
Nationally, the forecast isn’t much better; Watkins and his team are predicting that unemployment will stay above 9 percent for the rest of the year. 
 
What the nation needs, Watkins said, is a stimulus that invests in useful infrastructure, rather than just throwing money at the problem.
And the country needs more consumer demand, which Watkins said can be fixed with what he called a “politically incorrect” idea.
 
“There’s no problem we have right now that can’t be solved by a few million immigrants,” Watkins said. 
 
The place to start, he said, would be with the skilled and ambitious people who come from all over the world to go to college in the United States. 
“When they’re done with school, we send them back,” Watkins said. “The world is full of people with a lot to bring to us and we won’t let them in.”
 
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