CA Job Growth to Slow as Economy Dodges Recession

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There’s no question California’s economy is slowing down as employment growth continues moderating. However, it remains on track to dodging a recession—quite possibly until 2021—as the state’s local regions fare differently for various reasons.

That’s according to three different local economic forecasts recently held in March by the UCLA Anderson Forecast, Beacon Economics consulting firm, and the Stanford Institute for Economic Policy Research. These experts’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

California’s economy will continue growing in 2019 and 2020, although at a much slower pace than the past couple of years. The probability of the state and nation falling into a recession is only 17 percent in 2019 and 28 percent by sometime in 2020—both of which could rise slightly higher in the coming months as more monthly/quarterly economic data is captured. However, recessions usually only happen when the risk level rises to approximately 50 percent (which could ultimately take place and is not being ruled out as a possibility).

California’s Gross State Product (similar to the national Gross Domestic Product—GDP) was 3.1 percent year-over-year as of fourth quarter 2018, but it will slow down to 2 percent in 2019 and 1 percent in 2020. It could likely speed up back to 2 percent in 2021 (baring an economic recession). GDP at the state or national levels is the traditional measurement of economic growth. From a national perspective, U.S. monthly non-farm company payroll growth (averaging 220,000 per month in 2018) will drop to an average 160,000 per month in 2019, and then drastically to as low as 20,000 monthly in 2020 as there are only so many individuals to employ in a very tight labor market.

It’s possible California’s economy could experience a “near recession pace” sometime between late 2020 and mid-2021—but this isn’t the textbook definition of a “recession.” This forecast is subject to change by late 2019 (within 6 months). But with current employment levels so high, job openings at a record peak, consumer confidence and spending relatively healthy, and interest rates still comparatively low by historical standards, it would take a much larger unforeseen event to throw U.S. economic growth off its course. Some experts hypothesize something negative is brewing in the global and corporate debt markets (high risk bonds) and/or trade, tariffs and political tension. But so far indicators suggest these threats are not as imminent as imagined—they are more a “cause for concern” than anything else right now.

Click here to read the entire forecast report.

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