The UCLA Anderson Forecast met yesterday and continued to offer two "scenarios" - recession and no-recession - rather than a single forecast, with the outcome heavily dependent on future Federal Reserve interest rate policy. They see the choice between the two scenarios as basically a coin flip. Unlike past recessions where California's industrial mix was heavy in vulnerable sectors (aerospace in the early 1990s, dot-coms in the early 2000s, and flaky mortgages in 2008), the current mix in California is favorable in the view of the forecasters.
So far, the high tech layoffs that have occurred in Big Tech seem to be offset by hiring in smaller, lesser-known firms. As a whole, that sector in California has continued to grow.
Thus, the forecasters see California having a more mild recession than the U.S. if a recession occurs. Also noted was the fact that state government has built up a considerable budgetary reserve which will help cushion the impact of any downturn. Of course, the Silicon Valley Bank collapse, which occurred just as the forecast scenarios were being put to bed, only adds to the uncertainty of the outlook.
From the news release:
In the event that the economy navigates a softer landing and avoids a recession, the California economy will grow faster than the national economy, according to the Forecast. Among the factors buoying the state’s economy are a strong construction sector, a sufficient rainy-day fund at the state government’s disposal, and an increasing demand for defense goods, labor-saving equipment and software...
In spite of higher mortgage interest rates, the continued demand for a limited housing stock, coupled with new laws permitting accessory dwelling units to be built in neighborhoods zoned for single family homes, leads to a forecast of increased homebuilding through 2025... In the recession scenario, the California economy would decline, but by less proportionally than that of the nation...
Full news release at https://www.anderson.ucla.edu/news-and-events/press-releases/us-and-california-economies-remain-crossroads.
After the forecast component of the conference, there was discussion of the healthcare sector.
You can see the entire conference at the link below:
Or direct to https://www.youtube.com/watch?v=LErAp5OegGM.
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