California: $3 Gas And No Recovery

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Whatever bad news California may have faced in the past, it is getting worse.

The new UCLA Anderson Forecast predicts that the state will not have any economic recovery until well into 2010 and that unemployment will stay at over 10% until 2011, according to Reuters.

New and negative economic forces may make California’s problems even worse.

The LA Times reports that gas prices in the most populous state in the nation are nearly $3. Obviously, if crude keeps moving up, that price could get worse, putting pressure on discretionary spending among consumers and gross margins at businesses which rely on gas, oil, diesel, of petrochemicals.

High fuel prices did a lot of damage to federal and state economies a year ago. The recession had not bitten hard then, but many households were being pressured by the choice between fuel bills and making credit and mortgage payments. With extremely high unemployment, the economic problems of the summer of 2008 are about to replay themselves but this times the environment is worse.

Douglas A. McIntyre