Dan Walters: Strength of California economic recovery still hazy

The big news in Stanislaus County these days is that a big Internet retailer – almost certainly Amazon – will establish a huge distribution center in Patterson that would employ at least 1,500 workers.

Meanwhile, California new car sales reached nearly 1.3 million vehicles last year, a 9.9 percent improvement over 2010, and the state's unemployment rate dipped in December to 11.1 percent, down 1.4 percentage points from the previous December, with at least a quarter-million more working.

Are they signals that California's economy, clobbered by the worst recession since the Great Depression, is on the mend? "Indeed," says Beacon Economics' Chris Thornberg, "virtually all major economic indicators have been trending positively for the state, and the nation overall. The recovery is real."

But there's a lot of uncertainty about recovery's rapidity and sustainability.

Gov. Jerry Brown concedes that recovery is slower than the administration thought it would be last year – which explains why state revenues are falling short of last year's rosy assumptions.

"The employment bounceback from this very severe recession has been so weak that the state's job level will not reach its pre-recession level until 2016," his new budget says. "This slow jobs recovery, due in part to a housing market that remains mired in a slump, continues to take its toll on state revenues."

The Legislature's budget analyst, Mac Taylor, is slightly more optimistic than Brown about the economy but markedly less optimistic about revenues because they depend more on high-income taxpayers' investment earnings than the general economy.

A quarter-million – or more – new jobs in the last year is certainly good news but it's not incompatible with a fairly slow recovery.

California lost well over a million jobs during the recession, so it could easily take four more years to achieve pre-recession employment. And even if it does, the unemployment rate could remain relatively high because our population is still growing by about 350,000 persons a year, thus generating more potential workers.

Moreover, hundreds of thousands of Californians have either dropped out of the labor force or have been forced into low-paying and/or part-time jobs. Federal surveys indicate the state's real rate of unemployment or underemployment is more like 20 percent.

It would, therefore, take many years of robust job growth to truly restore income-producing employment to pre-recession levels, and that would require countless billions of dollars in private, job-creating investment.

The Patterson project is just what California needs. But its 1,500 new jobs are what California needs every 36 hours to truly recover, and three food plants are closing in nearby Modesto with a loss of 265 jobs.