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California Drought: ‘Mild Impact’ To State’s Economy

Woranuch Joyce /CPR

Woranuch Joyce /CPR

A new forecast shows the California economy will maintain strong growth despite the drought and a "soft" U.S. economy. 

The projection comes from the University of the Pacific Center for Business and Policy Research

Center Director Jeff Michael said the Sacramento region is continuing a "strong and steady" recovery. 

"Sacramento will finally recover its pre-recession level of jobs later this year, towards the end of 2015,” said Michael. “That's an important benchmark, but it will actually be the last of the state's 10 largest metro areas to achieve this benchmark." 

Michael said Sacramento's recovery started later and the levels of growth haven't been as robust as the other metro areas, such as tech-driven San Jose, on pace for a rapid 5 percent job growth in 2015.

He said San Francisco, at a 4.2 percent, is also posting strong growth, as companies “remain undeterred by extreme housing costs and a tightening labor market.”

Michael said the Bay Area continues to have the hottest economy in California. 

He says the agriculture industry in the Central Valley has showed strong growth so far this year, despite the drought, and the region’s housing market and government sector continues to recover. Michael said most Central Valley metro areas will average single-digit employment in 2015, including Fresno.   

Michael says the forecast predicts the California unemployment rate will drop below 6 percent by the end of this year.

He said the drought likely reduced state GDP "by about 0.1 percent in 2014." The forecast predicts the impact will grow in 2015, but "remain below 0.25 percent of gross state product."

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