As California Goes. . .

December 29, 1992

As California goes, so goes the nation. Politically, culturall and, to some extent, economically. California is not just the most populous state by far. It is an economic bellwether. And even though the nation's mid-section is prospering as the coasts stay in the doldrums, California is still an engine that can drive the national economy upward or a millstone that can drag it down.

A forecast of the state's economic prospects from the University of California at Los Angeles, more pessimistic than most but also recently more accurate, thinks its economy will be bogged down for another year or two. The study expects the state's economy to slip another 1.1 percent next year and to recover only about 1.5 percent in 1994. Unemployment, now 10.1 percent, would hit 11 percent for the next two years.

These figures are ominous. California represents such a large chunk -- 13 percent -- of U.S. economic activity that it impacts materially on overall national performance. If California were a nation, its economy would rank it as perhaps the sixth largest in the world.

Those who think California is suffering more than the rest of the country because it has so many defense-related industries are mistaken. In fact, the UCLA report said, many major sectors of the state's economy are hurting -- money-starved governments, weak housing prices, empty office buildings and struggling durable goods manufacturers.

"Growth in the national economy is accelerating," according to David Hensley, director of the UCLA forecasting project. But he is skeptical California will soon join the surge: "The question concerning the California economy in the near term is whether the state finally is poised to recover. In our best judgment, the answer is no."

Hopeful forecasts for the multi-regional national economy -- which are obviously dependent in considerable measure on what President-elect Clinton does early next year -- are not inconsistent with pessimism about its largest state component. But it does mean that the state which led the country's economic surge in the '80s will be a drag on it for another year or two. That makes the incoming administration's task all the harder.

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