The California economy should maintain solid 2.6 percent growth in 2017 with the unemployment rate holding steady at 5.4 percent as job growth decelerates to 1.6 percent according to the latest projection from the Center for Business and Policy Research at the University of the Pacific. Beyond 2017, growth is expected to slow as the initial boost from anticipated tax cuts and deficit spending under President Trump fades and reduced federal healthcare spending, reduced immigration and international trade, and a rising dollar and interest rates curb growth.
The Bay Area is better positioned to benefit from tax cuts and reduced financial regulation, while the Central Valley has benefited greatly from expanded healthcare spending under Obamacare and will be disproportionately harmed by its expected repeal.
The Bay Area economy is gradually slowing but should continue to lead the state in job and income growth over the next two years. Central Valley metropolitan areas averaged strong 3 percent job growth in 2016 but will see slower growth in 2017, especially in the North San Joaquin Valley. By 2018, job growth in these areas will have declined to about 1 percent, considerably slower than recent years as the impacts of Obamacare repeal start to be felt. Despite slower growth, the outlook for the Valley remains relatively positive in historical context as all Central Valley areas in the forecast will sustain single-digit unemployment in 2018 and 2019.
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 Go.Pacific.edu/CBPR.