U.S. Government news as it impacts California.

July 26, 2013

California might benefit from White House Manufacturing Initiative

The Obama Administration has launched a new program called rogram the “Investing in Manufacturing Communities Partnership” (IMCP) and recently held their first and only meeting in California. This roundtable event in Woodland was sponsored by the White House and the USDA and attracted about 125 people.

As part of a national manufacturing strategy. 25 communities around the country will be awarded $200,000 each to create an implementation strategy for this program. In addition, a half dozen or so communities will be awarded up to $25 million each next year from the U.S. Commerce Department for manufacturing strategies that are ready to be implemented.

According to a report by the California Economic Summit, a public-private partnership group called Innovate North State proposed concentrating on five industries: agriculture, cleantech, health, web and information technology as well as manufacturing. They have identified 100 manufacturing companies in the northern part of the state, and are planning to submit a proposal to the IMCP.

Filed under Economic Development, Manufacturing, U.S. Government by

November 26, 2012

USAID awards UC Berekley $20 million for Global Development Initiative

The U.S. Agency for International Development (USAID) has awarded $20 million to the University California Berkley to fund a new multidisciplinary lab to prepare inventions for the developing world, train development practitioners and innovators, and launch a new field of research called “Development Engineering”. The funding is part of USAID’s Higher Education Solutions Network, a new initiative that was recently launched to leverage faculty and student ingenuity at U.S. and foreign research universities to help fight global poverty, according to a press release from the University.

Berkeley’s new Development Impact Lab (DIL) will be located in the Blum Center for Developing Economies and will utilize mobile technologies to improve health care, expand communications services in remote areas, improve access to safe water and deliver new energy technologies. “We recognized that the Blum Center represented something special: a center for deep analysis and broad engagement that not only generates new ideas, but also tests and applies real-world solutions,” USAID Administrator Rajiv Shah said on campus last month. “In fact, we’ve admired it so much that it is now the model for a network of development laboratories we’re forming across the country”.

Filed under International Development, U.S. Government by

October 5, 2009

American Apparel forced to lay off 1,800 immigrant workers

The Obama administration has forced American Apparel to lay off 1,800 immigrant workers there.  As reported in Terra:

The firings at the well-regarded Los Angeles based company provide a clear example of how the Obama administration is trying to move from workplace raids to forced termination in the fight against illegal immigration. But the firings are not without controversy, Mayor Antonio Villaraigosa said the terminations were “devastating” and his office publicly called on the federal government to focus on employers that exploit and abuse their workers. American Apparel has historically been very good to their workers, providing all of their garment producers with health and life insurance and paying them well above the standard going rate for garment workers.

Opinions on this move have been mixed. While some say these jobs can now go to Americans and legal residents, others say this could further harm a region already devastated by unemployment. The Los Angeles Times, for example, wrote the following editorial:

There are those who believe that Los Angeles will benefit because those jobs will now go to American citizens. Certainly that is possible. Joblessness in California is at 12.2%, a 70-year high andfar past the national average of 9.7%, according to the Bureau of Labor Statistics. And between August 2008 and August of this year, Los Angeles lost more jobs than any other U.S. city. Citizens of every race and ethnicity, desperate for employment, are now frequenting day- labor sites in downtown L.A. and Hollywood, according to the Wall Street Journal; some have turned to farm work and labor in the fields. But even if American Apparel replaces its lost workers with U.S. citizens, it’s just a shell game; one problem is solved while another is created.

Filed under Fashion and Apparel, U.S. Government by

June 16, 2009

U.S. refuses California emergency financial assistance

The Obama administration has refused requests for emergency assistance from senior State government officials. Calling California, “one of the biggest remaining threats to the economy” the Washington Post reported that top state officials have gone hat in hand to the administration, armed with dire warnings of a fast-approaching “fiscal meltdown” caused by a budget shortfall. Concern has grown inside the White House in recent weeks as California’s fiscal condition has worsened, leading to high-level administration meetings. But the Post reported that federal officials are worried that a bailout of California would set off a cascade of demands from other states. The administration is also concerned that California will enact massive cuts to close its deficit aggravating the state’s recession and further dragging down the national economy. After a series of meetings, Treasury Secretary Timothy F. Geithner, top White House economists Lawrence Summers and Christina Romer, and other senior officials have decided that California could hold on a little longer and should get its budget in order rather than rely on a federal bailout.

Filed under California Economy, California Government, California Politics, U.S. Government by

March 12, 2009

San Francisco Chamber on anti-”anti-junket” junket

Fifty members of the San Francisco Chamber of Commerce have taken a business trip to Washington D.C. to protest the “anti-junket” attitudes that have gripped Congress and the public after several incidents of abuses by bailed out financial firms. As reported in the San Francisco Chronicle:

Big business is cutting back on convention travel these days, afraid of being branded as lavish spenders in a down economy. And that’s having a real impact on cities like San Francisco, where conventions and business meetings have a huge impact on our economy. That’s the message a delegation of the city’s civic leaders will deliver to Congress today, specifically asking the Northern California congressional delegation to help tone down the criticism of such business meetings. The San Francisco officials are concerned that businesses that otherwise would send employees to meetings and spend appropriate sums on food and entertainment will increasingly cancel meetings out of fear they will be singled out on Capitol Hill and by the public as overindulgent. “They don’t want to be on the front page of the newspaper or on the 11 o’clock news, seen as frivolously spending money even though it is for legitimate purposes,” said Joe McInerney, the president and chief executive officer of the American Hotel & Lodging Association, based in Washington. The San Francisco Chamber of Commerce-led delegation, consisting of some 50 participants, is in Washington to ask members to keep in mind the economic contribution of travel and tourism while they negotiate proposed restrictions on recipients of federal emergency funds. They do not want legitimate business travel chilled because of extravagant spending by others… “We do not want to support irresponsible extravagance, but we also do not want to discourage business from holding conventions and meetings so they can spend appropriately on entertainment in San Francisco,” said Steve Falk, the chamber president. Among those suffering the consequences of a falloff in business are service employees, he said. “While we understand the need for transparency, we want to make sure that legislation (covering emergency fund recipients) does not have the unintended consequences of impacting negatively on the hospitality workforce,” said Mariann Costello, vice president of Scoma’s restaurant in San Francisco, who is among the chamber delegation.

Filed under Business Associations, Travel and Tourism, U.S. Government, U.S. Politics by

February 12, 2009

Tesla seeking $350 million loan from Federal Government

Tesla Motors Inc. said it has not been notified yet whether it will get a $350-million loan from the federal government, but expects word within four to five months.  A newsletter distributed Wednesday by the company caused confusion when CEO Elon Musk wrote, “I am excited to report that the Department of Energy informed Tesla last week that they expect to disburse funds … within four to five months.” Some took that to mean that the loan had been approved but the company said later that this isn’t the case.  Spokesperson Rachel Konrad said the Department of Energy hasn’t given final confirmation to any of the 75 entities that applied for the funds. “No one has gotten final confirmation,” she said. “That said, we’re very confident we’re going to get financing.”  Full story here.

Filed under Manufacturing, U.S. Government by

November 17, 2008

Federal grant of $125,000 awarded for sustainable wine program

The California Sustainable Winegrow-ing Alliance, created by the San Francisco-based Wine Institute and the California Association of Winegrape Growers has received a $125,000 specialty crop block grant from the U.S. Department of Agriculture’s Agricultural Marketing Service to create a certification system for the effort. According to a Business Journal Report, the program started five years ago with the creation of the voluntary Code of Sustainable Winegrowing. Some environmental-protection advocates have called for third-party verification of compliance with the extensive best-management practices in the code. The alliance is currently drafting guidelines for certification.

Filed under Agriculture and Food, Business Associations, U.S. Government, Wine by

October 6, 2008

California seeking $7 billion emergency loan from Federal Government

California may be the next domino to fall in the global financial meltdown, and it has gotten surprisingly little attention. Because of the credit crises, the State my had difficulty arranging financing for the bond sales it uses to generate cash flow to run the government. Governor Schwarzenegger has written a letter to the Secretary of the Treasury, Henry Paulson, advising him that California may need a $7 billion emergency rescue loan from the Federal Government. State Treasurer Bill Lockyer warned that the State’s cash revenues will dissipate completely by the end of the month, and the state’s 5,000 cities, counties, and school districts will face job layoffs and payments for law enforcement agencies, teachers, nursing homes and an array of other services and government entities could soon be suspended.  As reported in Financial Times:

California’s economy, which would be the eighth biggest in the world if the state was a separate country, is teetering on the brink of a financial crisis intensified by the credit crunch. California is weeks away from running out of money. In a letter to Hank Paulson, the US Treasury secretary, Arnold Schwarzenegger, California’s governor, last week admitted an immediate $7bn was needed to pay for essential public services, such as police and fire-fighters.

California would normally generate interim funding by issuing “revenue anticipation notes” in the short term credit markets to tide it over until tax revenues arrive later in its financial year. But the door to the credit markets is firmly closed.   Other states are also suffering from poor economic conditions and declining tax revenues.

Florida, Nevada, Massachusetts and Ohio have dipped into their reserves  to maintain spending, according to Robert Kurtter, managing director of Moody’s US public finance group. But he said California’s situation was unique as it often relied on the capital markets to maintain spending commitments.  “When you have that dependency year-in-year-out you are going to get caught out when the markets are disrupted,” he said. “And that’s exactly what happened.”

Unlike most other states, California does not have a reserve fund and because it depends heavily on capital gains tax and stock option realisations, its revenues can be volatile. The looming cash flow crunch has caused considerable alarm.  “We are two weeks or so away from not being able to pay teachers and fire-fighters,” said Ross DeVol, director of regional economics at the Milken Institute, a Los Angeles-based think-tank.

Passage of the $700bn bail-out bill last week may not have solved the state’s immediate problems. “If we could get through the next two or three weeks without another financial institution being taken over that might restore confidence in counter-parties. But I don’t think the bill will free up the credit markets in the near term.”

Bill Lockyer, California’s treasurer, said immediate cash needs could be met with as little as $3bn.  But to end its reliance on the markets, California must first become better at balancing its budget, said Mr Kurtter. “Typically, when entities get into trouble it begins with cash flow. And when you are chronically running budget deficits, your cash is going to dry up.”

Filed under California Economy, California Government, U.S. Government by

February 27, 2008

Schwarzenegger wants Pentagon to return equipment

As reported in the San Francisco Chronicle, Governor Schwarzenegger told Bush administration officials that he is tired of the Pentagon treating the California National Guard like a stepchild by using its equipment in Iraq and Afghanistan without returning or replacing it.

The Republican governor, in a visit to Washington for the annual meeting of the National Governors’ Association, said the California National Guard is missing about half of its equipment – from humvees to radios. That could leave California at risk in an earthquake, fire or other emergency, Schwarzenegger said. “It’s not fair to the states for the federal government to go into a war and then to take from us the equipment,” he said after meetings Monday with President Bush and Cabinet officials. “Every time our National Guard leaves, they take with them equipment but they don’t bring it back.”

Adm. Michael Mullen, chairman of the Joint Chiefs of Staff, told Schwarzenegger and other governors that the Pentagon plans to pay to replace some of the equipment that is damaged or destroyed, but the compensation could take several years because of budget constraints. Schwarzenegger said states also face budget shortfalls and can’t shoulder the burden indefinitely.

During the Southern California fires in October, some local officials complained about a lack of air support to contain the blazes, while state and federal officials criticized the U.S. military for failing to deploy some of its C-130 planes immediately after the fires broke out….

The state estimates that $1 billion worth of equipment is being used, from diesel generators to trucks to GPS devices. The California National Guard is also stretched thin because about 1,400 guardsmen are helping the federal government to secure the border with Mexico. “There’s only so long you can do that,” the governor said. “We now are missing 50 percent of the equipment – the equipment also (used) to train the National Guard.”

Filed under Defense and Military, Governor Schwarzenegger, U.S. Government by

February 11, 2008

Federal Authorities Raid San Fernando Valley firm

More than 100 U.S. Immigration and Customs Enforcement agents raided a printer supply manufacturer in the San Fernando Valley on Thursday, taking into custody about 120 employees for being in the country illegally and arresting eight on federal criminal charges, according to a report in Associated Press. The raid at the offices of Micro Solutions Enterprises began around 3:30 p.m., said Virginia Kice, an ICE spokeswoman, who said the basis for the criminal warrant that led to the raid was under seal. The eight people were arrested for allegedly providing fraudulent information to get their jobs, Kice said. All of the 120 people taken into custody for illegal immigration status were interviewed for what Kice called “humanitarian issues.” About 40, including the elderly and those with children, were released to await a hearing before an immigration judge, Kice said.

Filed under Immigration, Legal and Criminal Issues, U.S. Government by

December 28, 2007

Governor plans to sue federal government over auto standards

Governor Schwarzenegger has announced plans to sue the federal government over its decision not to allow a California plan to reduce greenhouse gas emissions. The Environmental Protection Agency refused the state’s request for a waiver that would have allowed it to cut emissions faster than a new federal plan that President Bush had signed into law. “It’s another example of the administration’s failure to treat global warming with the seriousness that it actually demands,” the governor said at a news conference. “Anything less than aggressive action on the greatest environmental threat of all time is inexcusable,” he said.

It has subsequently been reported that the EPA head ignored his own staff recommendation in making the decision: “California met every criteria … on the merits,” an anonymous member of the EPA staff told the Los Angeles Times. “The same criteria we have used for the last 40 years … We told him that. All the briefings we have given him laid out the facts.” It has also been reported that Vice President Cheney may have been behind the controversial decision.

Staff at the EPA said the agency’s chief went against their expert advice after car executives met Cheney, and a Chrysler executive delivered a letter to the EPA saying why the state should not be allowed to regulate greenhouse gases.

EPA staff members told the Times that the agency’s head- Bush appointee Stephen Johnson, ignored their conclusions and shut himself off from consultation in the month before the announcement. He then informed them of his decision and instructed them to provide the legal rationale for it.

Filed under Environment and Climate, Governor Schwarzenegger, U.S. Government by

December 14, 2007

Silicon Valley businessman gets two years for selling night vision equipment to the Chinese

A Silicon Valley businessman was sentenced Monday to two years in prison for helping broker the sale of a night vision camera to a research institute linked to the Chinese military, according to an AP report. Philip Cheng, 60, pleaded guilty in October of last year to violating a U.S. law forbidding the export of military-related items to China. Cheng was originally charged in 2004 with six felonies, including conspiracy, money laundering and brokering the illegal export of defense-related equipment. A 2006 trial ended in a mistrial when the jury couldn’t reach a verdict, and he later agreed to plead guilty to one count. The indictment alleges Cheng and a business partner didn’t get the required State Department approval before selling a military-grade “Panther I” infrared camera to the North China Research Institute for Electro-Optics for $65,000. They also were accused of entering a contract with the Chinese military to mass-produce night vision equipment in China. Cheng is scheduled to begin serving the prison sentence on Feb. 12, and he has also been ordered to pay a $50,000 fine.

Filed under China, Defense and Military, Legal and Criminal Issues by

October 23, 2007

Yahoo accused of lying to Congress

A Yahoo Inc. executive has been accused of giving false testimony to Congress last year regarding the company’s role in the arrest of a Chinese journalist, according to a report in the San Francisco Chronicle. A House committee wants Yahoo CEO Jerry Yang and general counsel Michael Callahan to clarify at a Nov. 6 hearing the testimony Callahan gave Congress in February 2006. “Our committee has established that Yahoo provided false information to Congress in early 2006,” Rep. Tom Lantos, D-San Mateo and chair of the House Foreign Affairs Committee, said in a statement. “We want to clarify how that happened and to hold the company to account for its actions both before and after its testimony proved untrue. And we want to examine what steps the company has taken since then to protect the privacy rights of its users in China.” Rep. Chris Smith, R-N.J., while not naming Callahan directly, said in a statement that a Yahoo executive, “in sworn testimony … testified that the company knew nothing ‘about the nature of the investigation’ into Shi Tao, a pro-democracy activist who is now serving 10 years on trumped-up charges. “We have now learned there is much more to the story than Yahoo let on, and a Chinese government document that Yahoo had in their possession at the time of the hearing left little doubt of the government’s intentions.”

Shi was arrested at his home after posting material about a government crackdown on media and democracy activists on an overseas Web site. Police in Beijing found him, Lantos’ committee said, after Chinese authorities asked Yahoo to provide information about his e-mail account, including his IP address, log-on history and the contents of his e-mail over several weeks. He was sentenced to 10 years in prison in 2005.

Filed under China, Legal and Criminal Issues, U.S. Congress by

October 4, 2007

U.S. “deletes” California government domains

The U.S. General Services Administration accidentally “deleted” government website addresses for entire State of California yesterday. As a result, state government websites were unavailable to the public for most of the day until the system was restored late Tuesday. As explained in Network World:

Even the government shudders when someone says they’re from the government and they’re here to help. Case in point: A hacker’s diversion of traffic from a California county government Web site to a porn purveyor spiraled into IT chaos yesterday after a countermeasure applied from Washington essentially “deleted the ca.gov domain.”

Order was restored only after seven hours of frenzied coast-to-coast communications and a “forced propagation” of ca.gov network systems, according to Jim Hanacek, public information officer for the California Department of Technology Services.

“We don’t for sure have the whole picture, but as we understand it, there was some event at the Transportation Authority of Marin Country where their site got hacked,” Hanacek told me this afternoon. Traffic was being redirected from that site to one featuring pornography.

A department within the U.S. General Services Administration in Washington oversees and polices the .gov domain. “The federal government saw this incorrect use of ca.gov and they made a change at a much more global level than probably was necessary and it started taking down all of our ca.gov domain,” says Hanacek. “That impacted Web access and e-mail services.”

A Network World reader whose brother works for a California state agency forwarded me an e-mail alert that his brother received: “The Department of Technology Services (DTS) has notified us that the Federal Government inadvertently deleted the CA.GOV domain. As the evening progresses you may experience an impact in your ability to access some Web sites and exchange e-mail. DTS is working with their federal counterparts to restore service as quickly as possible but service may not be restored until tomorrow morning.”

The change from Washington was made around noontime yesterday on the West Coast … and things quickly got worse. “Unfortunately there was no prior notification, they just made the change and sent us an e-mail to one of our administrators who wouldn’t be a normal contact,” Hanacek says. “Once that person saw the e-mail and started looking we determined how serious this could be and we opened our emergency operations center. Unfortunately that was about 3 in the afternoon and folks back East were already going home, so it took us some time to get hold of the right people in the General Service Administration to get this address reinstated.”

Those corrections began between 4 and 5 p.m. PT but didn’t restore full normalcy until about 7:30 p.m. Hanacek indicated that California’s IT people will be having a chat with their Washington counterparts: “We’ll certainly be discussing how we should be notified of a change of this magnitude.”

Filed under Information Technology, U.S. Government by

September 28, 2007

California opposition growing to Blackwater military base

The recent shooting deaths of Iraqi civilians by Blackwater USA contractors has helped galvanize the opposition to their plans to build a private military base in California. In the most recent incident, Blackwater employees shot into a group of cars in a Baghdad square, killing at least 11 Iraqis and wounding 12. The Blackwater employees said they were ambushed but witnesses have described the shooting as unprovoked murder. “This is a nightmare,” a senior U.S. military official told the Washington Post. “We had guys who saw the aftermath, and it was very bad. This is going to hurt us badly. It may be worse than Abu Ghraib”. Iraq’s Interior Ministry concluded that Blackwater was at fault and ordered their license revoked causing still another embarrassment and huge headache for the Bush administration, which has relied heavily on private contractors for the occupation of Iraq.

Blackwater describes itself as “a professional military, law enforcement, security, peacekeeping and stability operations firm and has won more than $750 million in U.S. contracts for work in Iraq. It is owned by billionaire named Erik Prince, one of the largest donors to the Republican Party who is said to have links to the religious right and other far right political causes.

North Carolina-based Blackwater now wants to set up a paramilitary training base in the rugged mountains east of San Diego. The base is planned for Potrero, California, a small border town 45 miles east of the City of San Diego. The 24-acre facility is to have rifle and pistol ranges, helicopters and a helipad, armored vehicles and a defensive-driving motor course; and will have as many as 700 people present at any given time. The company typically hires highly trained former military personal such as Navy Seals for its security and paramilitary operations.

Residents of San Diego and Potrero have been organizing and began fighting this facility earlier this year on a number of issues- including environmental, local land control, noise, traffic, the risk of fire danger and basic opposition to the nature of Blackwater USA which many consider to be a mercenary group. It is strongly suspected that Blackwater has selected the San Diego border area in order to secure Federal Government contracts for border security.

Opponents to the expansion of Blackwater USA will stage a major rally and encampment at the gates of the proposed “Blackwater West” site in Potrero on October 6th and 7th. “The public is waking up to the atrocities attributed to Blackwater and to the private mercenary soldier industry now staring us in the face,” said Raymond Lutz, coordinator of Citizens’ Oversight Projects (COPS) and StopBlackwater.net. “The intimidating nature of these mercenary boot camps has kept locals from speaking out but, the tides have changed, when Blackwater USA tried to put in a jungle training camp in the Philippines they has to pull out after fierce public outcry. We can do the same here in San Diego County, we are resisting the further expansion of corporate mercenary armies and unregulated training of U.S. Armed Forces in residential areas.”

Filed under California Politics, Defense and Military, Iraq, U.S. Government by

September 27, 2007

Speculation on the impact of a dirty bomb on Los Angeles Ports

The Center for Risk and Economic Analysis of Terrorism Events at the University of Southern California recently speculated on the impact of a radiological dispersal device- i.e. a “dirty bomb” on the ports of Los Angeles and Long Beach, CA. Their conclusion: such an attack would likely result in few deaths, but there would be severe economic and psychological consequences resulting in losses of hundreds of billions of dollars, and the incident would create a critical missing link in the worldwide supply chain as the port is closed. More of this cheerful report can be found at this link: http://www.scdigest.com/assets/newsViews/07-09-18-3.php?cid=1229

Filed under California Ports, Defense and Military by

August 9, 2007

Congressman Lantos calls Yahoo “despicable” for role in Shi Tao case

Congressional investigators plan to look into whether Yahoo officials misrepresented the Internet company’s role in the arrest of a Chinese journalist sentenced to a decade in jail, according to a report in the San Francisco Chronicle. House Foreign Affairs Chairman Tom Lantos ordered the investigation after a human rights group released a document that it said raised questions about what Yahoo knew when it shared information with authorities about Shi Tao. Beijing officials had sought Shi for sending an e-mail about Chinese media restrictions.

“For a firm engaged in the information industry, Yahoo sure has a lot of secrecy to answer for,” said Lantos, D-Calif. “We expect to learn the truth and to hold the company to account.”

Yahoo general counsel Michael Callahan told lawmakers at a hearing last year that his company had no information about the nature of the investigation when it provided details about Shi to Chinese officials, Lantos said. But the Dui Hua Foundation has released a document that it says shows the Beijing State Security Bureau had written Yahoo saying it wanted e-mail content about Shi for an investigation into suspected “illegal provision of state secrets to foreign entities.” Lantos said that “covering up such a despicable practice when Congress seeks an explanation is a serious offense.”

Filed under China, Foreign Relations, U.S. Congress by

Flying-car developer wins DoD Contract

Moller International Inc. has been selected as a primary vendor for the Department of Defense development services, the Davis company has announced. The 12-18 month contract will not have an impact on the flying-car developer’s bottom line, Moller said. The contract will take advantage of Moller’s experience with ducted fans, manned and unmanned vertical take off and landing systems designs and high power-to-weight rotary engines.

Filed under Aerospace and Aviation, Defense and Military by

Western Growers hires former Trade Negotiator as new Lobbyist

Trade negotiator Cathleen Enright has been hired to head Western Growers’ office in Washington, DC. , according to a press release issued by the association. Enright has served as deputy assistant U.S. trade representative, plus held positions in the U.S. Department of Agriculture and the U.S. State Department.

“Cathleen stood out for her combination of academic training in science, intellectual firepower, her energy and determination, and her substantial record of achievement in the difficult world of foreign trade negotiations,” said Western Growers president and chief executive officer Tom Nassif.

As deputy assistant U.S. Trade Representative, Enright negotiated bilateral and multi-lateral agreements with U.S. trading partners that restored market access, or opened access for the first time, to U.S. agricultural commodities. Among these included agreements with South Korea for California citrus, India for California almonds, and Canada for northwest U.S. potatoes. Enright served from 2000 to 2006 as assistant deputy administrator with the U.S. Department of Agriculture. She negotiated the resolution of 30 plus phytosanitary trade barriers affecting U.S. agricultural commodities. From 1995 to 2000, Enright served as a policy analyst with the U.S. State Department, where she coordinated interagency and international coalition efforts for negotiation of an international treaty in trade in products of biotechnology.

Filed under Agriculture and Food, Business Associations, U.S. Government by

July 2, 2007

UCLA Forecast says U.S. is “close” to a recession

The sharp drop-off in growth in the first quarter of 2007, and the expected weak second and third quarters of less than 2% growth, caused the widely watched UCLA Anderson Forecast, a leading national economic forecaster, to conclude that although we may not actually be in a recession “it is certainly close.” The Anderson Forecast saw the slowed economy as lasting longer than previously expected. Weakness in the housing market and higher gasoline prices are starting to affect consumer spending. California, hit by a “double-whammy” from construction and mortgage finance, foreshadows a drag on the rest of the economy.

“Weakness in the real estate sector will finally spill over into the job market as the combination of job losses in construction and real estate finance pull overall payroll job growth in California to less than 1% for the next five quarters. Unemployment will rise to 5.5% and broad measures of real output (Gross State Product and Personal Income) will grow at a less-than-average rate of just-below 3%. The Forecast believes that weakness in the housing sector will finally spill into consumption spending, noting that retail sales stalled in April and that auto sales have been weak.

With housing and consumption both “down,” the strength of the national economy lies in the rest of the world. “The global economy is booming,” the report states “Indeed, it is the strength of the global economy that is powering the stock market to new highs (and) it is no accident that the Wall Street rally is being led by the giant global corporations who are benefiting most from the worldwide expansion.”

Filed under California Economy, U.S. Economy by

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