According to Yahoo News, California's economy is predicted to grow faster than the rest of the United States, but factors such as wars, politics, and high interest rates could hinder progress, according to the latest UCLA Anderson School state forecast. The report highlights that although recession concerns have subsided, increased military activity abroad and heightened geopolitical risks contribute to uncertainty about the future.
The forecast's director, Jerry Nickelsburg, stated that these uncertainties, combined with a slower-growing US economy, result in a slower-growing California economy. The report is titled 'From Rapid to Anemic Growth: The California Report.' Most national economists anticipate growth to slow down in 2024 due to similar uncertainties surrounding wars in Ukraine and Gaza, the presidential election, and the Federal Reserve's actions regarding interest rates.
The Federal Reserve has raised its key rate to its highest level in 22 years, and while no new increases are expected in the short term, the Fed has not yet achieved its goal of pushing inflation to 2%. Prices increased by 3.2% over the 12 months ending in October. The UCLA forecast predicts national price increases to slow to 3.1% next year and 2.8% in 2025, with California's prices expected to rise by 3.2% next year and match the national increase in 2025.
The forecast also projects California's unemployment rate to drop to 4.5% next year and 3.8% in 2025. In terms of jobs and housing outlook, California has experienced strong job gains in healthcare, social services, public and private education, and leisure and hospitality. The leisure industry, heavily impacted by the COVID-19 pandemic, has recovered to employ over 2 million people, similar to pre-pandemic levels. The forecast anticipates 'solid growth' in employment over the next six months.
Regarding housing, the report notes that higher interest rates should result in lower prices, but prices have been rising faster than inflation. California's new home construction is holding up compared to the rest of the nation, and the population loss to other states due to housing affordability is expected to continue, albeit at a slower pace. The report concludes that housing costs are increasing in states where Californians are relocating, and the gap between California housing prices and those in other states has significantly narrowed.
