#United States #Los Angeles #UCLA Anderson #California Economy #U.S. Recovery

Continuous Economic Weakness in the U.S. and California

The UCLA Anderson Forecast has recently revealed ongoing weaknesses in both the U.S. and California economies. As we head into the summer of 2025, concerning trends such as declines in payroll employment, inflationary pressures, and a pivotal shift in Federal Reserve policy, indicate that economic growth may not resume until late 2026. The implications of this outlook are considerable for corporate planning and investment strategies across the nation.

Key Economic Indicators Signal Challenges

In June, the United States experienced a notable drop in payroll employment, which signaled deeper challenges within the job market. Unemployment claims have remained unexpectedly low at 1.92 million, and while the unemployment rate is currently at 4.3%, historical comparisons suggest that this may not provide a full picture of the labor market's health. Particularly concerning are the weak employment growth rates, influenced by a reduction in the available workforce due to stringent immigration policies and the retirement of baby boomers. The current labor situation may point to an imminent recession, or at the very least, a period of economic stagnation characterized by limited job growth.

The Federal Reserve, under Chairman Jerome Powell, has reacted by altering its monetary policy to prioritize employment over inflation. Dubbed the “Powell Pivot,” this shift comes amidst rising inflation, which spiked to a seasonally adjusted annual rate of 4.8% in August. This inflation is driven in part by tariffs on imported goods and increased service-related costs, raising concerns about future pressures on consumer spending.

Specifics on the California Economy

California's economy presents an even bleaker picture. Over the last eight months, evidence suggests employment contraction, with several sectors such as technology, durable goods manufacturing, and logistics showing signs of stagnation or decline. Furthermore, as the state enters 2025, unemployment rates have increased, surpassing 5%. This downturn differentiates California's growth rate, which has fallen to half the national average, creating a challenging environment for businesses and investors alike.

The forecast indicates that California may not see a significant recovery until late 2026, with certain industries expected to rebound more robustly in 2027. Sectors traditionally associated with California’s strength, such as technology and manufacturing, will need to adapt to changing economic conditions, including potential labor shortages and shifts in demand for skills.

The Forecast Going Forward

According to projections, the U.S. economy will gradually recover, expected to reach a growth rate of around 2% by the end of 2026. Meanwhile, California's recovery is anticipated to be slightly slower, contingent on improvements in crucial industries. For instance, a resurgence in durable goods manufacturing, particularly in aerospace, could catalyze upward momentum once the sector finds its footing post-pandemic disruptions.

In terms of employment, estimates suggest California’s unemployment rate might hit a peak of 6.2% early in 2026, followed by an average of 5.5% for 2025, 5.9% for 2026, and then dropping to 4.6% in 2027.

The projected trends imply that while there are signs of gradual recovery, the coming years will pose significant challenges and require both public and private sectors to strategically navigate through likely periods of economic stagnation.

Conclusion

In conclusion, both the U.S. and California economies face considerable challenges, with the potential for prolonged periods of weak growth on the horizon. For businesses, stakeholders, and policymakers, understanding these trends is crucial in devising effective strategies to mitigate adverse effects and prepare for eventual recovery. Continuous monitoring of economic indicators will be essential as the landscape evolves in the coming months and years.