Economy Is Beginning to Recover on the Coast, but Inland Areas Remain in a Rut

By CARI TUNA

California’s economy is showing signs of stabilizing, but progress is uneven as coastal regions begin to rally and inland areas continue to sink.

Unemployment rates are dipping and home prices are rebounding in the San Francisco Bay area, which is driven by its technology industry and exports, and in coastal Southern California, where entertainment and other industries are starting to benefit from the economic thaw. But in the state’s Central Valley and Inland Empire regions, where the downturn struck earlier and harder, unemployment rates are still rising and the battered construction industry keeps shedding workers.

“California has become increasingly divided between coastal and inland areas,” said Hans Johnson, associate director at the Public Policy Institute of California, a San Francisco think tank.

While California’s economy has long had different pockets of economic activity,The continuing decline inland could drag down the state’s overall recovery and lead to greater inequality between residents. That has national repercussions, since the state’s $1.8 trillion economy is often viewed as an economic bellwether.

Overall, California’s economy remains weak, and the stabilization on the coast is just beginning. The state’s seasonally adjusted unemployment rate was 12.4% in December, down from an October peak of 12.5% but still higher than the national unemployment rate of 10%, according to the California Employment Development Department.

The different economic trajectories of the state’s coastal and inland areas are evident in the experiences of Marvell Technology Group Ltd. and Pelco Inc. Marvell, a Silicon Valley microchip maker, currently lists on its Web site about 120 job openings at its operational headquarters in Santa Clara, though some of those spots might be filled internally, said Marvell corporate-marketing executive Tom Hayes.

The job openings follow a sales drop in early 2009, when Marvell cut around 130 jobs in Santa Clara. Since then, revenue has picked up due to rising exports to countries such as China, among other factors, Mr. Hayes said. Marvell has about 5,000 employees world-wide.

By contrast, Schneider Electric SA’s Pelco unit laid off 100 of its roughly 2,200 employees last month amid weak demand. The maker of video and security equipment, located well inland in the Fresno County city of Clovis, said it didn’t expect sales to quickly recover. “It was just absolutely necessary to realign the size of our company to match the current economy,” spokeswoman Kathleen Rhodes said.

The inland-coastal split is likely to have significant demographic and social consequences. Mr. Johnson said that during the housing boom, many coastal residents moved inland to buy homes, despite longer commutes to jobs in the Bay area or greater Los Angeles. In recent years, that migration trend reversed, he said, as foreclosures mounted inland and housing prices fell on the coast.

Now, housing prices in coastal areas again are rising, a sign that their economies are reviving. The median home price in the nine-county Bay area increased 15.2% in December from a year earlier to $380,000, according to data provider MDA DataQuick. In coastal Southern California, the median home price increased 7.5% to $360,000.

By contrast, the median home price in the eight-county Central Valley fell 11.3% to $142,000 over the same period, according to DataQuick. In the Inland Empire counties of San Bernardino and Riverside, the median home price in December was $180,000, down 10% from a year earlier.

Local jobless rates, which aren’t seasonally adjusted, show a similar pattern. Unemployment rates fell in December from November in eight of the Bay area’s nine counties and three of coastal Southern California’s four counties, according to the state Employment Development Department. But in the Central Valley, where unemployment already is higher, jobless rates rose in six of eight counties and held steady in the other two. In a rare glimmer of positive news, San Bernardino and Riverside saw their unemployment rates fall in December, though joblessness there remained high.

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