The latest U.S. winter outlook spells trouble for dry California as global growth slows and the nation’s housing market dries up. The bleak outlook is based on a projection that America’s economy will grow a mere 2.2% next year as a result of tighter monetary policy and a global slowdown. “The outlook is very challenging,” said Joseph Gathany, senior economist at Moody’s Economy.com. “The economy is expected to grow at less than 3% next year, and economic growth in the United States is expected to be only about 2.2% next year, well below the historical average.”
?In California, home sales continue to sag, and the state’s high-immigration, high-energy jobs have created only a fraction of the housing that economists have been projecting would be added this year.
?The outlook is also negative for the rest of the nation, where housing prices are forecast to remain depressed, GDP growth is expected to slow, and consumers are increasingly reluctant to spend after years of spending their paychecks. “It’s a difficult forecast, given the state of the housing market in California,” said Mark Zandi, chief economist at Moody’s Economy.com.
?California was the nation’s fastest growing housing state between 1995 and 2000, thanks to high-energy, high-cost jobs, and low mortgage rates. Yet just 10.7% of those jobs are expected to return to the state next year, the lowest return in the nation.
?The outlook for housing is particularly bleak in the western United States where the housing market has been weakest over the past month.
?The U.S. economy grew 3.2% in the fourth quarter of 2008. ?But consumer spending plunged 10% in the wake of the global financial crisis, and it is expected to drop even more next year. And consumer spending is still running at a low rate.
?And the housing market is expected to shrink as baby boomers enter retirement. ?For years, California’s housing market had lagged the rest of the nation’s, as job growth is high in the state but