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California was a growth leader for the U.S. economy coming out of the Great Recession.

August 2018 CA Economic Outlook

August 13, 2018
By Robert A. Dye, Ph.D., Daniel Sanabria

California Economy Feels Cooler in 2018

    California was a growth leader for the U.S. economy coming out of the Great Recession. As the economic cycle matures, the state is running into some limits to growth. Strong job growth, supported by a vibrant high-tech sector has been a mainstay for the California economy. However, the state averaged a net of just 14,850 jobs gained per month through the first half of 2018, the slowest pace of hiring since 2011. With the state’s unemployment rate at a historical low of 4.2 percent in June, it will be difficult to re-accelerate the pace of hiring to that seen in recent years for two reasons. First, the pool of unemployed job candidates is small. Second, transferring an existing worker to a new job within the state would not result in a net job gain. California’s housing sector has also moderated in recent months. According to the California Association of Realtors, existing single-family home sales were 410,800 in June, down 7.3 percent from a year earlier. The supply of single-family homes for sale was at a tight 3.0 months’ worth. Declining affordability, due to rising mortgage rates and home prices, will also be a limiting factor on new home sales. With constraints on single-family housing, we expect multifamily projects to remain in demand. Trade data has also weakened. California’s exports and imports declined 7.0 and 5.2 percent, respectively, in June. Trade-related industries will feel the drag from tensions with China, California’s most important trading partner. The U.S. imposed a 25 percent tariff on $34 billion worth of goods from China on July 6 and will expand that to an additional $16 billion on August 23, with further expansion possible.

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