Los Angeles, CA — The recession that currently has the nation in a chokehold is different from past economic downturns because its root cause is an inside job.
According to Jed Kolko, an associate director and research fellow with the Public Policy Institute of California (PPIC), the cause of the current economic malaise is the imploding housing market, which in turn tugged the banking and financial systems down the drain.
And because the housing crisis is centered in California, said Kolko, the Bear Flag state is facing a particularly bumpy ride that has seen unemployment jump four percentage points up to 10.5%.
The numbers for African Americans are even more dismal.
Kolko said part of the reason, California’s unemployment is outpacing the national rate by 2 1/2% is that our labor force is outgrowing job creation. Additionally, one of the state’s leading job categories–construction–has plunged 15% over the past year. But there are industries that continue to grow, added the economist, who spoke as part of an Economic Recovery and Jobs Summit held last Friday by Assemblyman Curren Price at the California Science Center in Exposition Park.
Price is a member of the Assembly Jobs, Economic Development and the Economy Committee.
The Public Policy Institute of California is a private nonprofit organization dedicated to informing and improving public policy in California through independent, objective, nonpartisan research. The organization’s staff has expertise in areas such as economics, demography, political science, sociology and environmental resources.
What is also making this recession different from past downturns, added Kolko is that the federal government has gotten itself together much faster. “During the Great Depression, it took years.”
Another fact that sets California apart in this situation, pointed out the PPIC associate director, is that the state’s construction slide that has pulled so much of the state’s economy down with it.
“A lot of economists are predicting that the recession will end this year . . . a technical end of the recession,” said Kolko. But while that may be the case, he noted that businesses typically wait up to six moths after a technical end to a slump before they start spending at normal levels again.
Additionally, he expects unemployment to continue on its upward climb through 2010 and possibly into 2011, because it typically peaks 18 months after the end of a recession.
“In the California market, once we get back to normal, we are likely to see a permanently smaller industry in construction; higher savings rates and higher credit requirements,” Kolko said.
Nationally the debt will be higher, and American consumers will have to pay it off.
