In the coming months and years, California’s economy should do better than the rest of the country’s, a new report from UCLA Anderson said Wednesday.
Even though both the national and state economies are improving, economists have been worried for months that both will fall into a recession, which would mean fewer jobs.
But there is a lot of doubt about that. So, in its half-yearly estimate, UCLA gave two options: a recession or no recession.
If there isn’t a recession, “California grows and continues to grow faster than the U.S.,” the forecast said. This is because of more buildings, a large rainy-day fund for the state government, more demand for defense goods, and more demand for equipment and software that makes work easier.
The prediction says that if there is a recession, the California economy will fall, but not as much as the U.S. economy.
In April, the most recent month for which data is available, the state’s jobless rate was 4.5%, with 18.5 million people working and 867,500 people not working.
If there isn’t a decline, the average rate in 2024 and 2025 should be 4%. Last month, the national rate was 3.7%, but it would go up to 4% next year and 4.2% in 2025.
Prices in California could go up 3.1% next year and 2.3% in 2025. On a national level, they would go up by 3% next year and 2.1% in 2025.
The reply to the tweet below shows the Economy of California:
California’s economy is 3.5T which means it would rank 6th in the world ahead of the UK. pic.twitter.com/h7TYw5pZuR
— Richard Estrada (@LanceStryker6) June 7, 2023
If there is a decline, the rate would go up to 4.8% next year and 4.6% in 2025. The number for the whole country would be a little less.
The prediction says that prices will rise by 2.7% in 2024 and 2.5% in 2025 across the country. Prices are expected to go up 2.8% in California next year and 2.7% in 2025.
Scholars at UCLA seem to be more optimistic about California’s economy than the people who live there. A new poll from the Public Policy Institute of California shows that early 60% of residents think the state has entered an economic recession and that 6 out of 10 adults have had trouble because prices have gone up.
California is Upbeat
The UCLA outlook says that California has a lot going for it.
One has to do with leisure and service jobs, which are still not back to where they were before the COVID pandemic three years ago.
A lot of the jobs that need to be filled are in the Bay Area and Los Angeles. “This is partly because people who work from home keep the demand for restaurants and taverns in these cities below what it was before the pandemic, and partly because there aren’t as many foreign tourists, especially Chinese, in the state,” the forecast said.
It was hopeful because when people go back to work, some of those jobs will come back. And in China, the end of zero-tolerance COVID rules should lead to more Chinese tourists.
“This rise in tourism will have a bigger effect on California, New York, and Nevada than on the rest of the country as a whole, and it will lessen the effects of a slowing economy compared to the average for the country,” UCLA said.
The housing market and supply lines are also good signs.
People are still likely to leave the state to find cheaper housing, but the number of people leaving should slow as housing costs rise in popular places like Austin, Salt Lake City, Boise, and other cities.
The economies of the state’s airports and seaports are also set to get better.
New data show that the flow of goods seems to be “bottoming out,” but the forecast says, “It is too early to call a trend.”
The Federal Reserve is the most important part of any economic situation. It has raised its key interest rate 10 times in the last 14 months to try to slow inflation.
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The yearly rate of increase in the cost of living has gone from 9.1% a year ago to 4.9% in April. This is still higher than the Fed’s goal of 2%. The highest rate in California was 8.3% last year.
Economists don’t know if the Fed will stop raising interest rates. The Fed is set to meet next week.
In its prediction, UCLA said, “Over the past six months, there has been more uncertainty about California’s economy in 2023. The main cause of this unpredictability is the way the government handles the economy.”
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