With the coronavirus pandemic surging in California, leading again to restrictive health measures, the state’s economic future is in flux, but its ultimate recovery should be on pace with the rest of the country, although slower in key sectors such as leisure and retail, according to a UCLA forecast released Wednesday.
“Although the timing may be offset with California beginning a significant recovery later than some other states, we expect the California recovery to ultimately look very much like the U.S.,” UCLA Anderson Forecast director Jerry Nickelsburg and economist Leila Bengali wrote in their report.
“The recovery in CA will be slower in the leisure and hospitality and retail sectors due to the disproportionate reliance on international tourism, and mixed in transportation and warehousing due to the shift to online shopping on the one hand and the expected continuation of the trade war with China in a Biden administration on the other, but faster in business, scientific and technical services and in the information sector due to the demand for new technologies for the new way we are working and socializing, and faster in residential construction as California’s shortage of housing relative to demand drives new developments.”
The forecast predicts an 8.9% unemployment rate for the fourth quarter, with the rate dropping to 6.9% next year, 5.2% in 2022 and 4.4% in 2023. It also predicts a 6.1% jump in employment growth next year, with the rate dipping to 3.4% and 2.2% in the ensuing two years, as the state progressively recovers from the pandemic and its accompanying job impacts.
“In spite of the recession, the continued demand for a limited housing stock coupled with low interest rates leads to a forecast of a relatively rapid return of homebuilding,” according to the report.
The forecast calls for 123,000 net new housing units in 2021, rising to 132,000 by 2032.
Much of the forecast, however, is predicated on much of the population receiving COVID-19 vaccinations by summer.
“What we do know is that the pandemic is raging across the country once again,” Nickelsburg and Bengali wrote. “California has responded, as before, with more restrictive non-pharmaceutical interventions via mask mandates, closures and gathering restrictions. We expect that to continue, particularly through the holiday season as significant traveling by Americans has thus far presaged further increases in COVID cases.
“We also know that at least three vaccines are in the latter stages of testing and approval. Does this mean that we are out of the woods soon? The answer is maybe.”
For more on the forecast, see www.anderson.ucla.edu/centers/ucla-anderson-forecast/forecast-home.
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