The California economy should maintain strong growth through 2019 despite an uncertain political environment and financial market volatility, according to the latest projection from the Center for Business and Policy Research at the University of the Pacific in Stockton. California’s record low unemployment rate is projected to stabilize at 4.0 percent through 2020 before gradually increasing. California’s rate of economic growth is forecast to grow at a 2.9 percent rate for the next 12 months, and fall below 2 percent by 2021 as recession risks grow.
The regional outlook projects Sacramento to lead Northern California in job growth in 2019 after lagging slightly behind the rapid growth seen in the Bay Area, Stockton, and Merced in recent years. Sacramento’s government and healthcare based economy should sustain, if not accelerate, growth in 2019 as most other Central Valley areas gradually slow with the broader California economy. Forecasters also project San Francisco and San Jose to sustain over 2 percent job growth in 2019 despite the region’s housing constraints and unemployment averaging below 2.5 percent. This is partially due to increased commuting from inland areas, but also because skilled-workers are displacing others from the Bay Area’s housing stock which allows the region’s skilled workforce to grow significantly faster than population growth.
In addition to the detailed economic forecast for California and eight Northern California metropolitan areas, the forecast discusses Governor Newsom’s agenda including his recent announcement to downsize the costly and controversial megaprojects championed by Governor Brown: California high-speed rail and the Delta water conveyance tunnels. The full forecast can be downloaded from the Center’s website at Pacific.edu/CBPR.
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 Pacific.edu/CBPR.
Some highlights of the report can be found below.
Growing consumer spending at restaurants has fueled rapid growth in the Leisure and Hospitality sector. This sector has added up to 75,000 jobs in recent years, but projections are for just 10,000 to 15,000 new jobs in each of the next few years 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 slower revenue growth and rising pension costs.
Construction jobs have been growing rapidly in recent years as the hard hit sector continues to recover. Expect a slight slowdown in construction job growth in 2019, about 30,000 new jobs compared to as much as 50,000 in recent years. Job growth is limited by worker availability and little expansion to residential construction in 2019.
Single family housing starts are projected at 66,000 in 2019, about the same as 2018. Multi-family production is also projected to be flat in 2019 between 45,000 and 50,000 new units. After 2019, expect total new housing starts to gradually grow another 10 percent and stabilize at just over 125,000 total new single and multi-family units per year.
California’s population growth is projected at about 0.5 percent for the next several years, at or near a record low growth rate. California’s population is still on track to reach 40 million this year prior to the 2020 census, and should add about 200,000 new residents per year.