By Dan Walters
dwalters@sacbee.com The Sacramento Bee
Published: Sunday, May. 22, 2011 – 12:00 am | Page 3A

Has California’s recession-wracked economy finally bottomed out and begun to recover, albeit slowly?

Or has California become another Michigan, doomed to a semi-permanent state of economic malaise?

Gov. Jerry Brown adopts the former version in his revised state budget. He calls it a “modest drawn-out recovery” and cites “positive economic signs” such as a fractionally declining unemployment rate, growth in manufacturing and rising exports from the state.

But the budget also notes such negative factors as “weak housing markets (and) depressed construction activity,” and Japan’s devastating earthquake. And it says that recovery will be painfully slow, with non-farm employment not reaching pre-recession levels until 2016, nearly a decade after the recession began.

Even then, however, the unemployment rate would still be relatively high because of population growth that expands the potential workforce. The budget says that the unemployment rate might not drop to pre-recession levels until very late in this decade.

And that, relatively speaking, is the optimistic view. The negative view, voiced by economists such as California Lutheran University’s William Watkins, is that California may have lost its global competitive edge.

Watkins describes California as “something like a zombie state, not quite dead, but certainly not vigorous, moving but with no clear direction,” and says he expects that “the state’s long-term economic structure will continue to slip away from vitality and growth.”

The pessimistic take is that with a high tax burden, a dense regulatory structure, a decaying transportation system, still-high housing costs, an uncertain water supply, a failing education system, a chronically imbalanced state budget, and a growing underclass, California is not attractive to the massive investment it needs to employ 2 million jobless workers.

Certainly if the rest of the nation emerges from recession and California is left behind with Michigan, Nevada and a few other economic basket cases, we’ll know that we have fundamental competitiveness problems.

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