August 2019 California Economic Outlook

Robert A. Dye, Ph.D.

,

Daniel Sanabria

Golden Gate bridge with the city of San Francisco in the background

The California economy continued to expand at a moderate pace in the second quarter, boosted by stronger than expected job growth.



California Economy Okay in Q2, Still Faces Headwinds in H2

    The California economy continued to expand at a moderate pace in the second quarter, boosted by stronger than expected job growth. The state added 116,400 jobs in Q2, making it the strongest quarter for job growth since 2017Q4. Nearly one in four jobs created in California in Q2 were in the construction industry. This rise in construction hiring may only be temporary as California housing data has been soft in recent months. According to the California Association of Realtors, existing single-family home sales were down 5.1 percent in the 12 months ending in June. Declines in existing home sales over the past year were seen across all of the state’s major regions. Weaker sales have led to a rise in housing inventory in recent months. Rising inventories, in-turn, have put downward pressure on area home prices. According to Core Logic Case-Shiller, year-over-year home prices were up 1.9 percent in L.A., 1.3 percent in San Diego and just 1.0 percent in San Francisco in May. Lower home prices and declining mortgage rates will support housing activity this year. Yet, we are already late into the economic cycle and housing demand is mostly spent out. Therefore, we expect limited upside potential in California housing activity going forward. The other risk factor for our California economic outlook is the uncertainty surrounding the escalation in international trade disputes. The price-adjusted value of California international trade (imports plus exports) in May remained 8.4 percent below its February 2018 high. The U.S. announced a new round of tariffs on an additional $300 billion worth of Chinese imports which will take place on September 1.

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August 7, 2019
Robert A. Dye, Ph.D., Senior Vice President and Chief Economist at Comerica Bank

Robert A. Dye, Ph.D.

Senior Vice President and Chief Economist
Daniel Sanabria, Senior Economist at Comerica Bank

Daniel Sanabria

Senior Economist

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