CA Economy Playing Catch-Up; Back on Track by Late 2022

Worker

As California’s economy and jobs market continue playing catch-up to stronger growth in other states, experts hope “sidelined” individuals/workers will re-enter the labor force at higher, quicker monthly rates. This would help boost potential economic growth even that much more from 2021 – 2022.

  • California’s unemployment rate will fall to 3.9 percent by late 2022 or early 2023 (after spiking at 16 percent in the spring of 2020).
  • California’s total non-farm employment (company/organization payroll jobs plus independent/contractor jobs) will recover to its early 2020 level of 18.7 million positions by mid-2022 and climb to a record 19.1 billion by late 2022.
  • California’s unemployment rate will fall to its pre-pandemic level of 3.9 percent by late 2022 or early 2023 (after spiking at 16 percent in spring of 2020).
  • However, job openings across California remain pretty high currently, which has implications.
  • California’s annualized residential homebuilding permits will continue rising and remain a bright spot for the state’s economy and construction labor market.
  • In recent years, multi-family building permits have usually made up about 55 percent of all California permits while single-family permits are 45 percent — a trend not expected to change too much.
  • California’s job losses during 2020’s COVID-19 recession and subsequent employment growth during much of the economic recovery has continually under-paced the entire nation — until probably right now.
  • Although California’s job-growth “bounce back” will remain higher than the nation’s recovery for the next six months, the state has a larger proportion of workers who have exited the labor force.
  • Depending on the industry in California, payroll employment going into late 2022 will grow and/or recover to varying levels.
  • Overall, California’s leisure and hospitality industry will be the last to recover because of the depth of the decline in this sector and its reliance on international tourism.
  • California’s change in annualized total “real” personal income (adjusted for inflation) surged during 2020 but is already on its way lower.
  • Annual sales tax revenue in California has already recovered from the COVID-19 recession during last year and is on track to hitting new records over the next two years.
  • Annualized new-vehicle sales in California won’t fully recover over the next two years — however, although they’ve plateaued, this measurement most likely won’t decline.
  • The recent out-migration of residents from the Bay Area to other regions in California or out of the state “does not show unequivocal evidence of a mass exodus,” the forecast report states.
  • Since 2000, California’s health care industry has grown more than the state’s overall economy.
  • Regarding this changing health care scene in California’s economy: “The 2020 pandemic and recession sowed the seeds of change in some areas, but change does not happen overnight.”
  • As restrictions are eased in California this year, more travel will be unleashed and visitors should inundate all regions of the state.
  • While easing economic restrictions are occurring throughout the nation, it’s happening at a snail’s pace in California (where most economic activity in the state is still subject to some form of limitation).
  • In California, the extent of the recovery within the public’s perception of economic conditions will remain limited until the labor market improves and the number of reported COVID-19 cases falls significantly, enabling the removal of restrictions and restoring the ability to move freely.
  • The annual benchmark revision released March 12 by the California Employment Development Department (EDD) saw 2020’s employment figures revised downwards significantly.
  • Typically, annual revisions show greater California job losses than were initially reported during recession periods, so this downward adjustment was somewhat expected.
  • Compared to December 2019, there were 1.6 million fewer jobs in California’s economy by December 2020 (compared to the EDD’s original estimate of 1.4 million fewer jobs).
  • Recently, the California Composite Manufacturing Index reached its highest level since 2005.
  • The Chapman-Claremont McKenna California Consumer Sentiment Index surged nearly 42 percent in first-quarter 2021.
  • California’s unemployment insurance data and trends are slowly changing.
  • California’s year-over-year business formation applications are skyrocketing.
  • Small business activity across California was down at varying amounts compared to pre-COVID levels (February 2021 compared to January/February of 2020).

View the entire forecast!

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