As Economic Fears Grow, California Gets Good News

Even if the U.S. enters a recession this year, California will fare much better than the rest of the country. That’s according to a new 114-page report from the UCLA Anderson School of Management.

The UCLA forecasters did not say whether or not the U.S. would enter a recession, but laid out scenarios in either case. In the absence of a recession, California will average about 4% unemployment this year, 3.9% next year and 3.6% in 2025. Prices should increase about 3.8% this year, 3% next year and 2.8% in 2025.

In the event of a recession, “the California economy declines, but proportionately by less than that of the nation,” according to the forecast. In that scenario, unemployment would average 4.3% this year, 4.8% next year and 3.7% in 2025. Costs would increase to 3.9% this year, 3.1% next year and 3.4% in 2025.  

A number of factors are contributing to California’s strong position. These include robust construction, a sound rainy-day fund, and high demand for housing despite higher interest rates. 

The forecast should offer some sense of relief to Californians after a week of concerning economic news. Moody’s Investors Service cut its outlook for the U.S. banking sector on Tuesday following the collapse of Silicon Valley Bank and two others. Six U.S. banks are now being reviewed for potential credit rating downgrades.


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