November 2019 California Economic Outlook

Robert A. Dye, Ph.D.

,

Daniel Sanabria

San Francisco

The California economy improved in the third quarter of 2019.



International Trade Still a Risk for the California Economy

    The California economy improved in the third quarter of 2019. California posted a net 69,500 jobs gained in Q3. Year-to-date, California has added 236,300 jobs, which is a step up from 2018. The strength in the state’s labor market has helped to alleviate some of the drag from California’s slumping residential construction sector. A reduction in the mortgage interest deduction and rising mortgage rates in 2018 was a one-two punch on the state’s housing sector. In response, demand for housing declined across some of the major metropolitan areas, leading to moderating home price growth this year. As of August, San Diego home prices were up 2.3 percent, L.A. was up just 1.1 percent and San Francisco was unchanged year-over-year, according to Case-Shiller data. Mortgage rates continued to moderate this year as the Federal Reserve lowered short-term borrowing rates from July to October. Lower borrowing costs should support demand for state housing and motivate builders. California Governor Gavin Newsom also recently signed 18 bills to boost the supply of affordable housing in the state. Another headwind for the California economy is international trade. There is bi-partisan support for passing the USMCA into law, but that may not happen until early next year. The Phase 1 trade deal between the U.S. and China appears to be gaining traction. However, neither trade initiatives have been finalized to date and bi-partisan cooperation in Congress may deteriorate as impeachment proceedings heat up. The risks tied to trade policy uncertainty and to weak international demand may persist in the near-term.


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November 8, 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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