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Research Center Releases California Metro Forecast

The California economy should maintain strong growth through 2019 despite an uncertain policy environment and financial market volatility, according to the latest projection from the Center for Business and Policy Research at the University of the Pacific. California’s record low unemployment rate of 4.2 percent is projected to fall further to a low of 3.7 percent in 2019 before gradually increasing. California’s rate of economic growth is forecast at a strong 3.4 percent through 2019, and then declining to 2.5 percent in 2020 and 1.9 percent in 2021 as recession risk grows.

All of the Northern California metro areas covered in the forecast should experience job growth of 2 percent or more in 2018, led by Merced, San Jose and Stockton which are all on track for growth of about 3 percent. Recent Bay Area job growth is remarkable in light of its housing and labor force constraints. In addition to commuting, data shows the Bay Area has overcome these physical constraints by growing its labor force significantly faster than its population. It appears new workers, attracted by lucrative employment opportunities, are displacing families and retirees from the existing housing stock. This pattern should continue and allow for some additional job growth in the Bay Area, but it will be slower as the unemployment rate reaches 2 percent in San Francisco and San Jose.

In addition to the detailed economic forecast for California and eight Northern California metropolitan areas, the forecast discusses the recent trends and policy affecting farm labor markets, legal cannabis, and plans for the Delta tunnels. The full forecast can be downloaded from the Center’s website at

The Center for Business and Policy Research at the University of the Pacific was founded in 2004 and was known as the Business Forecasting Center until March 2015. The Center is a joint program of the Eberhardt School of Business and the McGeorge School of Law programs in public policy and has offices at the Sacramento and Stockton campuses. The Center produces economic forecasts of California and eight metropolitan areas in Northern and Central California, in depth studies of regional economic and policy issues, and conducts custom studies for public and private sector clients. For more information, visit

Highlights of the June 2018 California Forecast:

Over the next 12 months, real gross state product is forecast to grow at a strong 3.4 percent pace before dropping to 2.5 percent growth in 2020 as recession risks grow.

The California unemployment rate is forecast to average 4.2 percent for 2018 and fall further below its record low to 3.7 percent in 2019 before gradually increasing.

Nonfarm payroll jobs will grow 1.7 percent over the next 12 months, dropping below 2 percent growth for the first time since 2011. Payroll growth will drop below 1 percent by late 2020 which is expected for an economy at full employment after a long expansion.

Health Services has become the largest employment sector in the state after a period of rapid growth. Health services is projected to add more than 45,000 positions over the next 12 months, a slowdown from the 85,000 health services jobs added in 2017.

Professional Scientific and Technical Services is a high-paying sector that has fueled the recovery. This sector is forecast to maintain its recent level of growth and add 25,000 jobs over the next year.

Growing tourism and a gradual shift in consumer spending from retail to restaurants has fueled rapid growth in the Leisure and Hospitality sector. While this sector has added as many as 75,000 jobs in recent years, it is projected to fall below 20,000 new jobs this year and experience even slower job growth in 2020 as rising labor costs and low labor availability drives change in the hospitality sector.

State and local government employment experienced solid 2 percent employment growth from 2014 to 2017 as public budgets, especially in education, recovered. However, state and local government hiring will drop below 1 percent for the next several years in spite of revenue growth as these entities grapple with rising costs of pensions and other compensation.

Construction activity continues to grow with 40,000 to 50,000 new jobs anticipated in each of the next three years. Construction wages have been among the fastest growing of all sectors as employers compete for a limited supply of skilled workers.

Single family housing starts surpassed 60,000 in 2017 and are projected to grow to 75,000 by 2020. Multi-family production is projected to be near 50,000 units this year, and near 60,000 units by 2021. With this increase, housing production will finally be sufficient to keep up with modest 0.7 percent projected annual population growth, but will not be enough to provide relief to California’s housing crisis.

California’s population growth rate has declined to 0.7 percent and is projected to remain at this level through the four-year forecast. California’s population will reach 40 million by early 2019, and is adding less than 300,000 new residents per year, notably fewer than in the past.