A California Update
What is happening with the California economy? While news about the nation’s economy is everywhere, sometimes it is hard to find out how things are going in your own backyard. Enter the UCLA Anderson Forecast, an economic forecast specific to California. The most recent report released in June provides a detailed look at the Golden State with a particular look at jobs and real estate. Here is a quick overview of the study’s conclusions.
According to the UCLA team, the job recovery in California has been very odd compared to other recessions in that the jobs recovery since 2008 was very slow and long when compared to the quick, sharp recoveries seen in other recessions. Nonetheless, the study concludes “employment in California has grown steadily and is now at record levels”. Unemployment is about even with national levels at 5.4% and the outlook for California is strong with the expectation that job creation should outpace the rest of the nation. The technology sector – always a growth engine for California – was a strong source of jobs, and Healthcare was another strong standout.
California real estate has been in a boom as the state recovers from the depressed prices of the great recession. While real estate prices are still below their pre-recession peak in most places, real estate prices have risen dramatically from the 2009 bottom. Meanwhile, vacancy rates in commercial real estate are very low, generally signaling strong support of current prices. The shifts in real estate have been interesting. For example, demand for retail space has declined and demand for warehouse space has increased as more and more consumer spending shifts to the online marketplace. Meanwhile, multi-family construction is now at a 25 year high. The study concludes, “Cheap money, low levels of new construction except for apartments, and modestly improving demand, we are truly living in heady times.”
However, the forecast seeks to not only take the pulse of today’s market, it also seeks to anticipate the peaks and troughs of the real estate market, and here is where the forecast anticipates a ‘topping out’ but not a collapse. As the study suggests, “we are in no way forecasting a ‘crash’ but rather an extended period of sideways to down prices. Simply put, financial conditions will transition from being extraordinarily easy to just plain easy, making it unlikely for us to witness a repetition of the events of 2007-2009.”
Overall the Anderson UCLA Forecast strikes an optimistic note during a time of frequent pessimism in the news. The study concludes that California’s economy is healthy, job creation is strong, and the forecasted growth rate is better than that of the rest of the nation. While the economy is hardly roaring, the charts are still pointed upward as the economy yields steady growth – good news for those of us who live here.
Matkins, Allen. "Topping Out in California." UCLAAnderson. 2016. http://www.anderson.ucla.edu/centers/ucla-anderson-forecast/projects-and-partnerships/allen-matkins/summer/fall-2016-survey.