UCLA Forecast

The UCLA Anderson Forecast presented its March forecast today. The forecast was made before the Iran War began and did not include alternative war scenarios. Forecasters generally said much would depend on the length and course of the war which is uncertain at this point.

Excerpt from news release:

The California Economy

California’s economy presents a contrasting pattern: strong output growth paired with weak payroll employment. As the March 2026 California report notes, “Normally, one would expect employment to grow in step with output and income; however, the opposite has occurred.” Using a monthly GDP methodology developed by the Forecast, economists estimate California’s fourth-quarter growth at 3.8% annualized, well above the initial 1.4% U.S. GDP estimate. The state has now grown faster than the nation for four consecutive quarters. 

Yet payroll employment declined in 2025, marking the first sustained contraction since the pandemic. The unemployment rate has remained above 5% for nearly two years. As of December 2025, it stood at 5.5%. 

The report characterizes the state’s structure as a “new bifurcated economy,” driven by AI, aerospace and other high-productivity sectors on one side, and slower-growing sectors such as construction, retail and segments of leisure and hospitality on the other. Venture capital concentration remains significant, with nearly 70% of U.S. venture funding flowing to California in early 2025. 

Encouraging signs are emerging in aerospace and computer systems design, where hiring has begun to recover. If sustained, these sectors could provide a basis for stronger employment growth in 2027 and 2028. Goods movement also shows improvement, with port activity and air cargo volumes rebounding to or above pre-pandemic levels. 

Housing remains constrained by workforce shortages, tariff-related input costs and financing conditions. Lower mortgage rates may spur some additional activity, but permit levels remain subdued and multifamily development is not expected to accelerate materially in the near term. 

California Forecast Numbers 

Unemployment Rates (Annual Averages) 

2026: 5.6% 

2027: 4.8% 

2028: 4.4% 

Total Employment Growth 

2026: 0.9% 

2027: 1.8% 

2028: 2.1% 

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Source: https://www.anderson.ucla.edu/news-and-events/us-economy-poised-reaccelerate-2026-fiscal-stimulus-and-ai-investment-intensify.

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Rick Caruso, the developer who ran unsuccessfully for mayor, was a guest speaker. He repeated his previously announced decision not to run for governor or mayor in upcoming elections, citing family safety concerns. Generally, he noted a need in California and the local area for stability and efficiency in policy decisions related to construction of housing and other projects such as desalination plants.

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The final session of the Forecast meeting was devoted to the likely economic impact of the World Cup and Olympic events on the local economy. Although there were offsetting effects described, the net effect was seen as positive as more dollars would be flowing into the area through sports tourism.