California’s Economy to Cool in 2019
We expect the California economy to continue to expand in the near term. That said, downside risks to California’s economy have increased and the list of possible accelerators for the California economy has diminished. One item that remains on the plus side for California would be a resolution to the U.S./China trade war which would boost demand for California exports plus bolster overall shipping volumes through California ports. Job growth for the state is moderating. California added 284,300 jobs in 2018, the slowest pace of job growth since 2011. We expect the state to add about 276,000 jobs over the year ending in 2019Q4. Meanwhile, the state’s unemployment rate is near a historical low at 4.2 percent in December, and is expected to decline through 2019. With labor markets this tight, it is hard to see where more workers would come from. The most recent data from the Census Bureau is indicating that California is experiencing a net outflow of people even with a historically tight labor market. Low housing affordability and high business costs are persistent motivators for out-migration. Recent declines in mortgage rates and moderating house price growth across California’s major metropolitan areas will help affordability in the short term, but will not be enough to alter the state’s high cost of living. The rate of house price appreciation has moderated significantly in the second half of 2018 in California’s key cities. According to the Case-Shiller data, San Francisco house prices were up 11.1 percent in March 2018, over the previous year. In November the yearly gain had decreased to 5.6 percent.
For a PDF version of this report, click here: February 2019 CA Economic Outlook
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