STEADY AS SHE GOES!

• Author: McCrary, Deanna

CALIFORNIA'S ECONOMY SAILE SMOOTHLY INTO 2001

California's econmoy is like the month of March: in like a lion and out like a lamb. After five years of a loud roar, moving into 2001, economists statewide agree that the key descriptor for the new year is "moderation."

"[2000] will be a transitional year," states Jack Kyser, chief economist with the Los Angeles Economic Development Corp., a nonprofit group that tracks and promotes the five-county Los Angeles area's business community. "The economy will transition to a more subdued pace of growth."

Joe Mattey, economist and researcher with the San Francisco Federal Reserve Bank says 2001 will equalize the state: "It's an exciting time-in the Bay Area in particular. For California as a whole, next year is going to be one in which there is a leveling of the playing field-a diffusion of the prosperity to other parts of California and other parts of the nation."

SIXTH LARGEST ECONOMY

After experiencing slow growth for the first five years of the 1990s, the "new economics," spurred by the information technology revolution, sped everything up in the second half of the decade, recalling the "golden days" of the 1980s. California now boasts the sixth largest economy in the world-surpassing Italy in 1999. The last time California held sixth place was in the mid-1980s when the dollar was extremely strong. And the state might be poised to overtake Great Britain. The UCLA Anderson Forecast projects California's gross state product for 2000 at $1.35 trillion-just ahead of the U.K's 1999 figure.

Does this mean that the state has made up for losses suffered during the early-1998s' recession, in which it lost 250,000 jobs? "Is a sense, the answer is yes," states Rajeev Dhawan, director of econometric forecasting with the UCLA Anderson Forecast. "Employment levels in California recovered to their pre-recession levels by late 1995 and since then have added almost 2 million jobs. It is expected that [the state] will add another 4 million jobs in the coming decade."

Dhawan notes that if growth had continued at the 1980s' 2.4 percent, employment levels for 2010 would have been projected at 2.2 million higher.

"The loss of aerospace jobs [after defense spending cutbacks] was a structural event that permanently hurt the potential growth rate of the California economy," says Dhawan, adding that California's employment growth was double the national rate in 2000. He predicts this trend to continue in the new year.

"For the California economy as a whole, another source of momentum is the improved state fiscal conditions that partly reflect the strength of income tax revenues coming from the high levels of personal income," says Mattey. "We are entering a year in which some of the natural equilibrating mechanisms are kicking in. In 1999 and the early part of 2000, the national economy grew very fast, and over the broader period the equity market posted tremendous gains. There was tremendous job...