National economic growth is slowing, but not as quickly as previously anticipated, leading to a slightly more positive outlook for California, according to a UCLA Anderson Forecast released Wednesday.
“At present, and in spite of the trade tensions between the United States and China, the economic news remains positive,” UCLA Anderson Forecast director Jerry Nickelsburg wrote in his California forecast. “For example, the July county-wide unemployment rates from Marin to Santa Clara are below 2.2%; from Sonoma through the East Bay are below 2.7%; and in Southern California, Orange and San Diego counties are at 2.8%.
“To be sure, Los Angeles and the inland regions are not doing as well by this measure, but, unemployment rates are falling there as well,” he wrote.
Nickelsburg noted that the state is still seeing weakness in housing production, and he anticipates a bump in the unemployment rate by the end of 2020 and beginning of 2021, calling it “a consequence of the slower growth during this period.”
“It is followed by a rebound in economic growth and hiring in 2021,” he wrote. “For the entire years 2020 and 2021 we expect average unemployment rates of 4.3% and 4.6%, respectively.”
He predicted employment growth rates of 0.9% and 1.3% in the coming two years.
“Homebuilding will be lower by about 5,000 units in 2020 than previously forecast, but we remain optimistic with regard to 2021 new residential construction,” he wrote. “Needless to say, weakness in homebuilding, even with the new eased regulations and zoning, means that the prospect for the private sector building out of the housing affordability problem over the next three years is nil.”
On the national front, Anderson Forecast Senior Economist David Shulman wrote that things are looking up from an economic perspective, noting “decisive new highs” in stock prices, improved housing activity and better-than-anticipated employment growth.
“We modestly upgraded our forecast from last quarter to reflect improved financial conditions, a better housing and employment outlook, some relaxation of trade tensions and a modest improvement in business fixed investment,” Shulman wrote.
He forecast a slowdown in consumer spending, “largely coming from much weaker automotive sales as credit tightens in that sector,” and he warned of potential economic trouble down the road.
“But make no mistake, although we have lowered the risk of a recession, the second half of 2020 remains problematic for the economy,” Shulman wrote.