Shifting Political Winds Could Bring Trouble for California's Economy

LOS ANGELES (CNS) - California has seen continued job growth in a variety of sectors over the past year, particularly in the construction, hospitality and health-care sectors, but changes on the national political front could soon alter that pattern, according to a UCLA economic forecast released today.

Jerry Nickelsburg, director of the UCLA Anderson Forecast, wrote in his California forecast that the construction industry could be negatively impacted by rising interest rates, while health care and hospitality could suffer from changes in the Affordable Care Act and a drop in international tourism.

``Though the national data does not suggest a significant downturn in economic growth over the next 12 months, these patterns do not give us much in the way of historical evidence for continued robust employment growth,'' Nickelsburg wrote. ``Indeed, to continue the very rapid growth in employment requires immigration.

``With (President Donald) Trump's policies decidedly reducing immigration, net domestic migration to California would be required,'' he wrote.

Hampering that possibility, however, is the state's continued high cost of housing.

``It is well known that the high price of housing excludes many people who would otherwise move to California,'' Nickelsburg wrote. At least part of the reason why California housing from Bakersfield and Fresno to San Francisco and San Diego is uniformly higher than elsewhere in the U.S. is the premium, attributable to the amenities that Californians enjoy.

``The premium has been going up much faster than home prices in the rest of the country of late and that is the `housing affordability crisis' that the state Legislature and city councils around the state have been grappling with these past few years.''

Nickelsburg said that legislative efforts will ``moderate'' the increase in housing costs but won't do much ``to alleviate the high cost of living.''

``In other words, expect relatively slow growth in California, just slightly above the U.S. through the next few years with a tilt, a slight tilt, towards more new home construction,'' he wrote.

Nickelsburg predicted employment growth of 1.1 percent, 0.9 percent and 0.9 percent over the next three years, with the unemployment rate expected to reach 4.5 percent by 2019.

On the national front, UCLA Anderson Forecast Senior Economist David Shulman wrote in his forecast that the economic optimism that rose thanks to Trump's plans for tax cuts and infrastructure investment has largely fizzled because of a lack of movement on those initiatives in Washington, D.C.

``Nevertheless, notwithstanding the chaos in Washington, D.C., the economy continues to plow ahead with modest growth in real GDP and rather strong gains in employment,'' Shulman wrote. ``The employment gain has been even more impressive because it is occurring against a backdrop of a year-over- year decline in retail employment caused by the ongoing restructuring of that industry as online competition takes its toll.''

Shulman predicted growth in gross domestic product of 2.1 percent, 2.8 percent and 2.1 percent over the next three years.

Unemployment will remain at or below 4.4 percent over that same time period, he wrote.

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