Magazine article American Banker

Ailing California Shows Hints of a Mild Economic Recovery

Magazine article American Banker

Ailing California Shows Hints of a Mild Economic Recovery

Article excerpt

WASHINGTON -- California is showing faint signs of an economic upturn after a harsh recession that began nearly four years ago and disrupted the lives of millions of its citizens.

"I think the state's in a slow recovery," said David Hensley, vice president and real estate researcher for Salomon Brothers, Inc.

A rebound in California, with its large population and rich mix of resources, would provide substantial support not only for banks in the state, but also for the general U.S. economy.

Worst Appears Over

Analysts familiar with the state said it is too early to say if things are actually getting better, but they agreed that the worst is over and the economy appears to be stabilizing. There is also agreement that if the state does pick up this year, any recovery will be modest and fragile.

Since the beginning of the year, California has added about 40,000 nonfarm payroll jobs. That is not a lot in a state where 12 million people are employed, but it is a welcome reversal where payrolls have been shrinking since 1990.

Manufacturing employment, which has suffered as defense cutbacks slashed aerospace jobs to 200,000, from from nearly 300,000, is still not expected to turn around any time soon. One reason is that the downsizing of the defense industry - which fueled the California boom in the 1980s - continues apace.

But construction employment has recorded some gains as low interest rates have spurred an increase in homebuilding. And sales of existing homes are up. Meanwhile, some businesses in the services sector such as tourism, medical care, temporary help agencies, and entertainment are healthy or doing better.

There is also evidence that consumer spending and demand for credit are strengthening. Retail sales, including auto sales, have picked up recently. And commercial banks in the state report some increases in lending, especially for home mortgages and large household purchases. …

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