by the Center for Continuing Study of the Calif. Economy in Palo Alto.
Jobs will increase 21.8% from 2003 to 2012 in Calif. and 15% in the U.S.
One reason: The job mix. California has an above-average share
of leading U.S. job growth segments: Professional and business services,
information, tourism/entertainment and wholesale trade/transportation.
Also: Venture capitalists, who spend 40% of their money in Calif.
Fastest growth will be in the San Diego area, with a 25.6% gain.
Next: S.F. Bay Area, 24.4%. Sacramento area, 23.2%. L.A. Basin, 20.3%.
San Joaquin Valley, 18.7%. And the remainder of the state, 21.5%.
Expect high tech to make a rebound. The Bay Area, still hurt
by the tech downturn, will regain its place as a fast-growing economy
"in relatively short order," according to the UCLA Anderson Forecast.
It sees the area's jobs growing 1.5% to 2% in 2005...more in 2006.
The Inland Empire is poised for rapid expansion,
having added 12% more workers in just four years.
In the U.S., only Las Vegas has had more growth.
The San Joaquin Valley will lag in job growth
because its agricultural base is declining,
despite a surge in population through 2012.
Growth will be led by more businesses moving in.
Home prices will stay high, despite fluctuations,
simply because people want to live in the state.
There may be speculative up-and-down cycles,
but new-home building won't keep up with demand.
Californians will have lots more money to spend in the state.
Their per capita income will grow 2.8% faster than the rate of inflation,
allowing them to increase their retail spending by about 4% per year.
So the next decade will be good for doing business in Calif.
 Lunch-break rules will become more flexible within a few months.
State requirements for a 30-minute midday break by the fifth hour
of work are being revised to allow a lunch period within the sixth hour.
The Department of Industrial Relations also wants to move up the deadline
for filing such a claim from three years after the offense to one year.
Tech firms are likely to keep giving some employees stock options
as compensation, despite an accounting rule that takes effect on June 15.
The Financial Accounting Standards Board regulation will hurt many firms
by requiring them to deduct the value of options from their profits.
Start-ups, not usually profitable at first, need options to lure talent.
Big firms will continue giving top executives options to keep them happy.
Expect unemployment insurance rates to go up in coming years.
The state's Unemployment Insurance Trust Fund ended 2004 with a surplus,
but the Employment Development Department foresees the surplus shrinking
this year. A deficit of $100 million is likely by the end of 2006.
Count on lawsuits over the new workers' comp disability plan.
Unions are unhappy with the guidelines for paying permanent disability,
saying that the new standards will severely cut payments to workers.
The workers' comp law approved last year requires injuries to be measured
by standards OK'd by the American Medical Assn. and used in 30 states.
Though rules took effect Jan. 1, the comment period is still in progress.
 Increased inspections will slow deliveries from Calif. nurseries.
Federal regulations require more checking of plants being shipped
across state lines because of the outbreak of sudden oak death syndrome.
On the upside, prices may rise, and more states will OK Calif. plants.
The next wine grape region may be the northern Sacramento Valley.
Four wineries are already operating in the foothills of Shasta County.
Sales of Calif. almonds will see a spurt in Germany and Spain,
benefiting from poor growing conditions and sluggish production in Spain.
Strawberries will be scarce in stores for the next few weeks
because scattered frost in Ventura County caused a drop in production.
 Pleasanton's economy will be hurt by the takeover of PeopleSoft.
Oracle says it will keep many of the software maker's engineers
after completing the $10.3-billion deal. But some of the 3500 workers
in Pleasanton are likely to lose their jobs when the headquarters closes.
San Jose is encouraging mid-rise office buildings and housing
to displace one- and two-story tech buildings popular in the 1990s.
The goals: Keep the city's dwindling stock of technology companies
from moving their headquarters and draw firms seeking higher density.
Expect growth along North First Street, in south San Jose and downtown.
S.F. will get an upgraded warning system for tsunamis, fires,
terrorist attacks and other dangers by the end of Jan. New loudspeakers
will warn residents, and police will be sent to endangered areas.
The Ocean Beach area is especially vulnerable to big waves.
The system was planned before the deadly tsunami in the Indian Ocean.
Vacaville is awaiting a 166-bed Kaiser Permanente hospital.
The HMO also plans a medical office building in the growing area.
A San Luis Obispo County resort has cleared a major hurdle
by winning zoning approval from county supervisors. The 33-acre project
in Avila Valley has a 125-room hotel, a restaurant and conference center.
 Sacramento's $53-million Marriott Residence Inn opens in 2006.
The 15-story project will be on the last undeveloped private land
in Capitol Park, close to the capitol building. Three Indian tribes
own 62% of the development, which includes 239 hotel suites and 30 homes.
A commuter train is proposed to run from Modesto to Sacramento,
going through Stockton, with transfers for the Altamont Express line
to the Bay Area. The plan by the San Joaquin Regional Rail Commission
is facing skepticism from Union Pacific, which says there's no room.
The first new housing for downtown Fresno in 25 years is planned
at a former motel site at Broadway and Amador. Seven stores or offices
and 38 loft-style apartments will be built at the city-supported project.
 Riverside County is moving to restrict construction on hillsides,
taking its cue from Palm Springs, Corona and San Juan Capistrano.
Draft rules would require split-level homes to blend into the hillsides,
limit grading and prohibit two- and three-story homes in some areas.
A big casino addition debuts in Indio Jan. 13. A 250-room hotel
and a special events center are part of the $200-million expansion
at Fantasy Springs casino, owned by the Cabazon Band of Mission Indians.
Another hotel, a golf course and shopping center are also being planned.
A Canadian tech firm will open shop at the former Norton AFB
in San Bernardino. Magneto-Inductive Systems, which uses magnetic waves
to see through solid surfaces, expects to employ 40 to 60 engineers.
L.A.'s Mid-Wilshire district is staging a steady comeback,
reversing a 10-year decline. Office buildings are filling up again
or converting to condos. Nightlife is steadily picking up at Koreatown,
the Wiltern LG theater and in the area around the old Ambassador Hotel.
But the Tri-Cities market is maturing, no longer a big attraction
for companies wanting to move their offices out of downtown Los Angeles.
Today, Glendale, Burbank and Pasadena have little room to expand,
and they aren't as aggressive as they used to be in luring business.
Glendale is even considering a business-license tax for the first time.
Why are commercial buildings being converted to housing?
The simple answer: Economics. California's supply of housing
has been limited over the past 10 years, with modest construction.
Take downtown Los Angeles, for example. The average condo
sells for $490 per sq. ft., while the price of an office building
averages less than $300 per sq. ft. In fact, a premier tower,
1000 Wilshire, recently sold for only about $250 per sq. ft.
Manufacturing space is popular for conversion in many areas.
Factories in Elysian Valley, north of downtown, are becoming lofts
that can serve as both studios and residences for artists and others.
There are drawbacks, of course. Building rehabs are expensive,
and the market could cool if stocks or interest rates rise further.
But the trend will continue until commercial space becomes hot.
There's no sign of home real estate softening in Los Angeles.
Lots of capital is available from pension funds and insurance firms,
and the city is a huge infill opportunity popular with investors.
|
 Home price increases in San Diego County will slow this year
from the blistering 22% pace in 2004. Prices of detached houses
will probably rise 7% in 2005, and condominiums only slightly more.
Since June, the number of houses on the market has just about doubled,
and it's taking longer to sell them. It's hard to get the asking price.
A luxury housing development is planned for Scripps Ranch.
Warmington Homes Calif. will build 36 homes priced at $1.2 million-plus
in rustic traditional, Tuscan and Spanish colonial architectural styles.
Developers may lose the option of paying an affordable-home fee
to avoid making 10% of their housing units for low- and middle-incomers
in San Diego. The city council is expected to consider dropping the fees.
Oceanside's downtown project is moving closer to development.
Three finalists have revised their bids to build at least 240 hotel rooms
and 18,000 sq. ft. of commercial space on two blocks of Pacific Street.
City officials are likely to recommend a winner in mid-February.
 The growing economy won't bail out the ailing state budget.
It's true that state revenues are up $1 billion over predictions
in 2004/2005 and that there has been a surge in corporate tax receipts.
But these improvements won't be enough to close an $8-billion budget gap
between revenue and spending obligations that will appear in 2005/2006.
The fact is, much of the state's spending is on autopilot,
governed by formulas and cost-of-living increases established by law.
Under Prop. 98, school costs will go up from $30 billion to $31.4 billion
next year. The entire general fund budget for this year is $80 billion.
Gov. Schwarzenegger may try to talk schools into taking cuts,
but that's hard since the state constitution requires steady increases.
Biggest savings will be from reducing growth of current programs.
The governor may seek higher eligibility requirements to cut caseloads
for health care for the poor and for In-Home Supportive Services.
The in-home program's costs are expected to grow 13% next fiscal year.
Up to $3 billion can be spent from the economic recovery bonds
that were passed by referendum in 2004. Much of it will probably be used,
despite the Legislative Analyst's request that it be saved for 2006/2007.
The state will suspend a rule diverting sales taxes for highways.
Prop. 42 requires gasoline sales taxes to be directed to transportation,
but the rule can be waived if the general fund would suffer major harm.
Schwarzenegger will keep his promise to universities and colleges
to increase their spending by 3% in exchange for concessions last year.
He'll seek future reductions with legislation and initiatives.
The governor will try to reform Medi-Cal by raising copays
and allowing private hospitals to get a share of federal Medicaid money.
And he'll propose structural reforms to cut spending commitments.
Details are still to be worked out, but they'll be put before lawmakers,
and if legislators reject them, they might be presented to the voters.
For editorial information call us at 202-887-6462
©2004 The Kiplinger Washington Editors
|
