LOS ANGELES — After nearly five years of brutal economic decline, government retrenchment and a widespread loss of confidence in its future, California is showing tentative signs of a rebound. There is evidence of job growth, economic stability, a resurgent housing market and rising spirits in a state that was among the worst hit by the recession.
In September, California posted its biggest month-to-month drop in unemployment in the 36 years the state has collected statistics, even as its rate remains, at 10.1 percent, the third highest in the country. Last month, California payrolls swelled with 45,000 new jobs, the largest gross number of any state in November. The unemployment rate in Orange County was 7.2 percent in October, below the national average.
The housing market, whose collapse in a storm of foreclosures helped worsen the economic decline, has snapped back in many, though definitely not all, parts of the state. Houses are sitting on the market for a shorter time and selling at higher prices, and new home construction is rising. There was a 25 percent jump in home sales in Southern California in October compared with a year ago.
After years of spending cuts and annual state budget deficits larger than the entire budgets of some states, last week the independent California Legislative Analyst’s Office projected a deficit for next year of $1.9 billion — down from $25 billion at one point — and said California might post a $1 billion surplus in 2014. That was due in no small part to voter approval of Proposition 30, promoted by Gov. Jerry Brown to raise taxes temporarily to avoid up to $6 billion in education cuts.
“The state’s economic recovery, prior budget cuts and the additional, temporary taxes provided by Proposition 30 have combined to bring California to a promising moment: the possible end of a decade of acute state budget challenges," the report said. “Our economic and budgetary forecast indicates that California’s leaders face a dramatically smaller budget problem in 2013-14."
And 38 percent of Californians say the state is heading in the right direction, according to a survey this month by USC Dornsife/Los Angeles Times. For most places, that figure would seem dismal. But it is double what it was 13 months ago.
California still faces major problems. The economic recovery is hardly uniform. Central California and the Inland Empire — the suburban sprawl east of Los Angeles — continue to stagger under the collapse of the construction market, and some economists wonder if they will ever join the coastal cities on the prosperity train. Cities, most recently San Bernardino, are facing bankruptcy, and public employee pension costs loom as a major threat to the state budget and those of many municipalities, including Los Angeles.
A federal report this month said that by some measures, California has the worst poverty in the nation.
Still, the fear among many Californians that the bottom had fallen out appears to be fading. Economists said they were spotting many signs of incipient growth, including a surge in rental costs in the Bay Area, which suggests an influx of people looking for jobs.
“I think the state is turning a corner," said Enrico Moretti, a professor of economics at the University of California, Berkley. He said the recovery was creating regional lines of economic demarcation — “We are going to see a more and more polarized state," he said — but that overall, California was emerging from the recession.
Richard Green, the director of the Lusk Center for Real Estate at the University of Southern California, said the foreclosure storm was beginning to subside, and fewer foreclosed homes were flooding the market. That has meant homes are selling faster at higher prices — which means fewer homeowners under water.
“The most important thing is, if you look at job growth in California for the last 18 months or so, it’s been higher than average for the country," he said.
In one sign of a new spirit, some Californians are again promoting the idea of their state setting the cultural and policy pace for the rest of the country, a meme that, if ever true, appeared at least questionable as California endured cuts that diminished its once-great higher education system.
Rick Jacobs, the head of the Courage Campaign, a liberal advocacy group, argued that Californians, by voting to raise their taxes to pay for services, set a model Washington should follow in negotiations over how to avert the so-called fiscal cliff.
“One might argue that what happened in California will set the trend for what will happen in the country, meaning that opposition to taxing the wealthy is opposition to the future," he said.