Sacramento's economy will lag the nation into recovery, as California state budget shortfalls and a soft housing market hinder its progress. Employment growth will resume this year, though, a welcome turnaround after losing a combined 86,000 jobs in 2008 and 2009. During 2010, local Employment will rise by 0.7% with the addition of 5,300 jobs, 30 basis points shy of the US job growth forecast. Despite this small step in the right direction, the unemployment rate will remain well above average in the near term. As of mid-2010, local unemployment had fallen from its peak in the first quarter, but at 12%, it remained approximately 200 basis points above the US figure.

In addition to elevated joblessness, Sacramento continues to face challenges stemming from the housing crash, with the metro area registering one of the higher foreclosure rates in the nation. Local home prices have declined more than 50% from peak levels of late 2005 and could slip farther if government programs aimed at curtailing foreclosures fall short, resulting in more deeply discounted bank-owned inventory and hampering the onset of a sustainable growth cycle.

While far-reaching suburban submarkets have been more severely affected by the housing downturn and recession, no area or property sector has been completely immune to deteriorating commercial real estate fundamentals or rising distress. As of early July, approximately $1. 7 billion of local commercial real estate was considered troubled, placing Sacramento in the mid-tier when scaled to size and compared to other markets nationwide. Lodging properties account for the largest share of distressed dollar volume in the metro area, totaling $490 million and comprising 29% of the total.