UCLA Anderson Forecast still suggests a slowing state economy

The UCLA Anderson Forecast met yesterday morning in Korn Hall of the School. It projects a somewhat more robust national economy - slowing but not as much as forecast last September. The national economy spills over into California, which also is still projected to slow. No recession is projected, but it was noted that there is always some probability that events could occur that would trigger a downturn. Although state revenue was not discussed, projected slowing in the pace of economic activity could put some constraints on the budget.

From the official media release's section on California:

The improvements in the national economy, along with associated optimism in the national forecast relative to the past few quarterly reports, have made a positive impact on the California economy. The key word is “relative,” as it would be a mischaracterization to call the latest state forecast much of an improvement.

“Since national economic growth is slowing at a slower rate than the forecast three months ago, the California forecast is now slightly stronger than predicted last September,” writes UCLA Anderson Forecast Director Jerry Nickelsburg.

To be clear, however, “slowing at a slower rate” is still slowing.

Nickelsburg’s analysis, thus, is largely one of perspective. On one hand, growth in California is slowing. On the other hand, this is, in part, because unemployment rates are very low.

“Therefore, it follows that the rate of hiring should slow down,” Nickelsburg writes. “Through April of this year, that had not happened. Indeed, the rate of hiring for non-farm payroll jobs increased by 0.2 percentage points from 2018’s hiring rate. At some point, capacity constraints become binding, and with the October job numbers in place, there are indications that [the slowdown in hiring] has occurred.”

According to Nickelsburg, the economic news remains positive, in spite of trade tensions between the United States and China. As an example, the July 2019 countywide unemployment rates from Marin to Santa Clara counties are below 2.2%; from Sonoma through the East Bay are below 2.7%; and in Southern California, Orange and San Diego are at 2.8%.

In 2020 and 2021 California’s total employment growth rates are forecast to be 0.9% and 1.3%, while payroll jobs will grow at rates of 1.9% and 0.9%, respectively. These reflect the stronger growth in payrolls over the last year, even while total employment growth was weaker.

“Home building will be lower by about 5,000 units in 2020 than previously forecast,” Nickelsburg writes, “but we remain optimistic with regard to 2021 new residential construction.”

Weakness in home building, even with the new eased regulations and zoning, means that the prospect of the private sector’s solving California’s housing affordability problem over the next three years is nil, he writes.

Full release at http://newsroom.ucla.edu/releases/ucla-anderson-forecast-upgrades-outlook

Note: As always, the photos remind us of the availability of conference venues in many locations around the campus. The Regents - when they meet at UCLA - always now use the UCLA Grand Hotel and have yet to ask for an outside accounting of how it is doing in meeting its business plan. Yet, as long-time readers of this blog will know, the hotel project was controversial at the Regents when proposed. We will keep reminding folks of this failure to follow through.