According to UCLA Economists, it is predicted that California’s unemployment rate will continue to fall over the next several years as the state enjoys continued economic growth.
Improved Unemployment Rates in California
According to a report from the economists at UCLA Anderson School of Management, California’s unemployment rate is expected to fall to about 4.9 percent through 2017. Overall, the forecast calls for a total growth of 2.6 percent in 2015 before slowing to a growth of 2.1 percent in 2016 and 1.4 percent in 2017. Payrolls are also expected to grow at the same rate, while real personal income growth is estimated to be a 4.3 percent in 2015. Growth is expected to be at 3.4 percent in 2016 and 3.2 percent in 2017.
An Improving Economy
California’s economy has been enjoying an upward trend, and recent data seems to indicate that this is likely to continue. In December, UCLA Anderson Senior Economist Jerry Nickelsburg analyzed the state’s most recent data – including trade through ports, state government finances, international arrivals at LAX and SFO, residential construction and employment – and found that the state is likely to continue to enjoy ongoing growth. Not only did international passenger arrivals at LAX and SFO reach record highs over the past year, but port activity was at a historically high level in September. Residential construction also continues to enjoy growth while employment has enjoyed impressive gains.
Taking a Broader Look
Nationally speaking, the country is expected to enjoy an increase in growth rates. In return, this will fuel the local economy and further contribute to a decrease in the unemployment rate. Economists further predict that the Federal Reserve will begin normalizing interest rates as the “zero interest rate” policy comes to an end. This means the Federal Funds rate may soon see an increase. Ultimately, UCLA economists predict the federal funds rate will reach 1.5 percent by the end of 2016 and 3.25 by the end of 2017.
In terms of unemployment, the national unemployment rates are currently experiencing a paradox. In October, the unemployment rate was at 5 percent, which is traditionally considered to be the definition of “full employment.” On the other hand, the employment-to-population ratio is 59.3 percent, which is four percentage points below the level that was recorded before the 2006 financial crisis. As such, while employment remains healthy and 200,000 jobs are being added to the economy each month, many Americans may not feel like it has been much of a recovery.
With employment on the rise and wages expected to grow, economists predict that 2016 will result in the first year with a greater than 3 percent growth in real GDP since 2005. Meanwhile, higher housing costs, a rebound in oil prices and higher wages is likely to result in an inflation rate of more than two percent.
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(all data current as of 5/29/2017)
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