California economy is having a ‘subpar’ year in 2024, study shows
California’s economy will grow more slowly than the rest of the nation this year, a new UCLA Anderson forecast said Wednesday.
With national economic growth not expected to pick up until after next month’s election, “a full year of subpar growth in California is forecast,” said Jerry Nickelsburg, director of the UCLA Anderson forecast..
Growth in 2025 and 2026 should be faster than the nation’s, Nickelsburg said, “but not by much.”
Reasons for the sluggish outlook are similar to those that California has faced for some time.Employment in sophisticated technology and in rural areas has been lagging, and housing continues to struggle.
The state’s unemployment rate has been among the highest in the United States all year, and the trends that have sent that rate up are expected to continue during the rest of 2024. The state’s economy grew at a 2.8% pace in the second quarter of this year, slightly less than the U.S.
Silicon Valley, San Francisco and San Diego all saw job growth proceed more slowly than in the rest of the country, thanks largely to a slowdown in the technology sector.
Also lagging has been the economy in the San Joaquin Valley, hit hard by a second straight year of what the report called “unusual winter weather.”
“The employment picture leads to a relatively weak California forecast for 2024 and a slow return to the national unemployment rate,” the outlook said.
California’s unemployment rate in August, the latest data available, was 5.3%. That tied the state with Illinois for the nation’s second highest rate. Nevada was first at 5.5%.
The UCLA forecast saw the California rate averaging 5.3% in the first three months of next year, then dropping to 4.9% in the spring and 4.4% in the summer. The rate is projected to stay at roughly that level through 2025 and 2026.
Nationally, the August rate was 4.2%. The federal Bureau of Labor Statistics will report the September rate on Friday.
UCLA saw the national rate averaging 4.4% in the first six months of next year, followed by 4.3% in the summer.
There was a brighter prediction for housing in California. The forecast said the market “may well be on the cusp of a trend toward normalization.”
Mortgage interest rates are at two year lows. The Federal Reserve is expected to continue cutting its target rate, considered a strong influence on other rate trends.
The forecast did come with a warning: “With existing home sales at depression levels, builders should be responding to new developments, but a very wet winter has resulted in very little growth in building permits.”
Still, the report saw better times ahead. Home sales should rebound as interest rates drop, it said, which will also boost the health of the finance sector.
Manufacturing of durable, or bigger, items such as computers should “turn around with new factories now in construction opening (and) increased demand as the economy grows over the next two years.”
Also looking up: Artificial intelligence development and commercial aerospace production.
This story was originally published October 2, 2024 at 1:00 AM with the headline "California economy is having a ‘subpar’ year in 2024, study shows."
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