California economic outlook is good for 2024. What about unemployment, housing?
California’s economy should grow somewhat faster than the nation’s, though its unemployment rate will remain above the national average, a new forecast by the UCLA Anderson School said Wednesday.
“The forces driving California’s economy remain robust,” said the analysis by Jerry Nickelsburg, forecast director.
Consumer price increases in California, which averaged 4% last year, should drop to 2.6 this year. The latest national inflation rate, for the 12 months ending in February, was 3.2%, the federal Bureau of Labor Statistics reported Tuesday.
California, though, should continue to have an unemployment rate higher than the national average, the forecast said. That rate averaged 4.2% last year and is expected to climb to 4.6% this year before falling in 2025.
The state’s unemployment rate in January was 5.2%.The national rate was 3.7%.
Reasons for the higher California rate include people spending their time in what the forecast called “non-market activities such as child raising.” The state has also lost jobs recently in administrative services, such as temporary workers, and education.
The overall California economy, though, is expected to keep growing, and a big reason is the potential for growth in tech industries.
Professional, scientific and technical services employment did drop at the end of 2023, but the forecast noted that “today tech is embedded in more sectors.”
As a result, “there exists a higher probability that green tech, med tech, aerospace tech and the like will be able to absorb these layoffs.”
The analysis cited the latest venture capital spending into artificial intelligence research and development, saying it “provides some heavy tailwinds for the Bay Area tech sector.”
Remember, too, it said, that while layoffs may be announced by California-based companies, they are mostly multinational firms cutting jobs around the world.
How will housing fare?
The analysis was somewhat optimistic about the battered California housing market.
“Higher mortgage rates should send prices lower,” it said.
In January, sales of existing single family homes in California were up 14.4% from December. The statewide median home price in January was $788,940, down 3.8% from December. In Sacramento, the median in January was $515,000, down 3.7% from a month earlier.
Mortgage rates nationally averaged 6.88% last week for a 30 year fixed-rate loan, matching the average for the past year, according to Freddie Mac, which tracks mortgage rates. The Federal Reserve has sent signals it will begin lowering rates sometime this year.
That trend, combined with continuing demand for housing and state policies promoting new home building should mean a good recovery for the housing sector.
The risks to the overall forecast involve domestic policy and the international situation. And, the forecast said, there’s still “the potential for interest rates to still disrupt the current expansion.”
It’s also unclear what if any impact potential cutbacks in state government spending could have. The state faces a budget deficit of $73 billion, the state Legislative Analyst’s Office reported recently. Gov. Gavin Newsom has estimated the shortfall is $38 billion..
