US growth to ramp up by mid-2014

Despite the self-inflicted wounds of the 16-day federal government shutdown and the effects of the botched rollout of the Affordable Care Act's insurance marketplace on the health care sector, which accounts for 18 per cent of the economy, the US economy is growing.
However, in its fourth and final quarterly report of 2013, the University of California Los Angeles's Anderson Forecast asserts that real growth is expected to be a tepid 1.8 per cent in the current quarter, but economists predict a "sustained 3 per cent growth path by the second quarter of next year."

In such an environment, the economy will be on track to add approximately 200,000 jobs per month, and the unemployment rate will decline to about 6 per cent by the end of 2015.
In California, the economic picture remains split as the gap between the coastal and inland areas widens. Along the coast - from Marin County to San Diego, including a sliver of Los Angeles County - employment gains are outpacing the nation.

Over the past 12 months, Silicon Valley has created payroll employment at twice the US rate. But a look inland shows a different picture: the Inland Empire and the Sacramento Delta regions are growing at a subpar rate, and the East Bay and San Joaquin Valley regions are showing little growth or negative growth.

The national forecast
In his December report, senior economist David Shulman writes that as long as the federal government does no harm, growth in the US economy will be sparked by strength in the housing and automobile sectors, combined with increased business spending and an end to the dramatic drop in federal purchases.

Taken together, these factors are expected to put the economy on track to a 3 percent growth path by mid-year 2014 and bring the unemployment rate down to about 6 percent by the end of 2015.

Policy interest rates will stay low throughout 2014, but with inflation increasing to slightly above 2 percent due to rising housing and health care costs (some coming from the implementation of the Affordable Care Act), it is expected that the zero-interest rate policy of the Fed will come to an end in the spring of 2015.

The California forecast
The California report by senior economist Jerry Nickelsburg takes another look at the split between the state's coastal haves and inland have-nots.

As a whole, California has just about recovered all of the jobs lost during the recent recession. In total, jobs in California - including payroll, farm and self-employed - declined by 1.065 million but rebounded by 1.044 million through October 2013.

But a look at payroll jobs alone reveals that only 0.848 million out of 1.313 million lost jobs have been recovered, suggesting that Californians are creating their own jobs by starting new enterprises at faster rates than established businesses are hiring.
The vast majority of employment gains are found in communities along the coast, while job growth remains stagnant in inland California.

Nickelsburg does note some bright spots inland, including Kern County's energy boom and the new medical school at the University of California, Riverside, which will begin to generate higher-education jobs as well as a cluster of health care-related jobs.

The forecast for total employment growth of 2.4 per cent in 2013, 1.5 per cent in 2014 and 2.0 per cent in 2015. Non-farm payroll employment is expected to grow at 1.7 per cent, 1.8 per cent and 2.2 per cent.. Real personal income growth is forecast to be 0.6 per cent in 2013, followed by 3.2 per cent and 3.1 per cent in 2014 and 2015.

Unemployment will fall through 2013 and will average approximately 8.9 per cent for this year.

In 2014, the unemployment rate is forecasted to drop to 8.2 per cent on average - more than one percentage point higher than the US forecast - and then to 7.3 per cent.