Forecast

The UCLA Anderson Forecast met yesterday amidst a climate - tariffs up and down, wars in Ukraine and Israel-Iran, deportations - that makes forecasting difficult. From the accompanying news release:

The UCLA Anderson Forecast’s second quarterly report of 2025 presents a sobering view of the economic landscape for both the United States and California. The national economy, while resilient in early 2025, faces a period of deceleration owing to aggressive trade policies, fiscal instability and labor market disruptions. Meanwhile, California is already experiencing a mild contraction, with job losses and stagnation in key sectors undermining the state’s economic momentum...

National: Although the labor market showed strength through the spring with robust job growth and low unemployment claims, this momentum is not expected to last. The unemployment rate is projected to rise to 4.6% by the end of the year, with further increases likely to continue into 2026. Inflation, which had been moderating, is expected to exceed a 4% seasonally adjusted annual rate in the second half of 2025 as tariff-related costs ripple through supply chains. Long-term interest rates are also on the rise, with the 10-year Treasury note projected to peak at 4.7% before gradually declining. Real GDP growth, which contracted slightly in the first quarter, is expected to slow to near zero in the second half of the year, with only modest recovery anticipated through 2027...

California: The sectors that have historically driven California’s superior growth — technology, durable goods manufacturing, entertainment and logistics — are either stagnant or contracting. Healthcare, education and government, which supported growth in 2024, have likely reached their peak. The housing sector is also under pressure, with deportations reducing the construction workforce, rising input costs owing to tariffs and high interest rates constraining new home development...

The forecast for the California economy is that it will grow slower than the U.S.’s in 2025, with several quarters of negative job growth. A recovery from California’s 2025 economic doldrums could begin in mid-2026, and economic growth is expected to increase in 2027...

Full story at https://www.anderson.ucla.edu/news-and-events/economic-and-geopolitical-uncertainties-persist-us-and-california-economies-slow.

It's this sluggish outlook that makes for the gloomy projections regarding the state budget.

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It was announced that the current director of the Forecast, Jerry Nickelsburg,* will be retiring, although continuing with responsibility for the California portion of the Forecast. The new director will be Anderson Professor Sebastian Edwards.**

*https://www.anderson.ucla.edu/faculty-and-research/faculty-directory/nickelsburg.

**https://www.anderson.ucla.edu/faculty-and-research/global-economics-and-management/faculty/edwards.

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UPDATE: The Forecast conference can be seen at the link below:

Or direct to https://www.youtube.com/watch?v=Ohq0ClFofyo.