California’s Economy Will Continue to Outshine Most of the U.S.
The California economy has been going gangbusters over the past few years and should continue to march along nicely over the next two years.
As one of the most populous states in the country, California contributes slightly more than 14 percent to the nation’s gross domestic product – far more than any state. And that should continue with the state’s economy predicted to grow 2.7 percent this year and 2.6 percent next year, according to the recent “Economic Forecast & Industry Outlook for 2018/2019,” released on Feb. 21 by the Los Angeles County Economic Development Corp.
The LAEDC report outlined a good-news scenario for the state and the nation despite recent bad-news headlines about the wildly fluctuating stock market and the uncertainty of tax cuts on California residents.
The good news is that the state is expected to see job growth in almost all major industry sectors for the next few years with an increase of 324,700 new jobs this year and 311,800 jobs in 2019. That means that California’s unemployment rate should continue to hold steady at 4.2 percent through 2019, meaning there will be more pressure for wage increases to attract qualified employees.
Major industry winners will be in the area of administrative and support services, which will add 137,400 this year, and healthcare and social assistance, which will see 100,300 new jobs take shape in 2018.
Amazingly, the manufacturing sector, which has been shedding jobs at a rapid pace over the last several years, is expected to grow with 30,040 new positions through 2019. However, that still won’t make up for the 166,700 jobs that disappeared between 2007 and 2017.
Manufacturing includes apparel factories and textile production, which recently have been shedding jobs at a rapid pace, particularly in 2017 when American Apparel shuttered its Los Angeles factory and sold its brand name to Gildan Activewear, laying off nearly 3,500 workers.
BCBGMaxAzria also declared bankruptcy in 2017, laid off more than 500 employees and sold its intellectual-property rights to Marquee Brands.
On a more positive note, the construction industry in California saw positive growth in 2017 with new residential construction showing moderate gains last year and the value of nonresidential construction permits jumping by 8.5 percent to $29.9 billion. The strongest gains in construction by sector were retail and new industrial buildings, while office, hotels and motels saw decreases.
In Los Angeles County, the number of permits issued for new home construction saw an 8.9 percent uptick in 2017 from the previous year for 22,010 units. But that is far behind the number issued in 2004 when 26,935 units were permitted.
Still, new home construction is not keeping pace with demand, resulting in the median home price in Los Angeles County rising 8 percent last year to $560,860, which is 75 percent higher than in 2011.
On the national front, there is also room for optimism. The economy is expected to move along nicely, although stepping back from previous predictions of strong growth.
Even with regulatory and political uncertainties, the nation’s gross domestic product is expected to surge ahead with 2.3 percent growth this year and 2.1 percent growth in 2019. For a while, some economists foresaw a healthy 3 percent rise in the GDP.
Clouding the future is the Federal Reserve’s expected three increases this year to the benchmark interest rate, leaving businesses and individuals worried that it will cost more to borrow money after years of rock-bottom interest rates on everything from mortgages to car loans.
The interest-rate increases are in response to the 2.5 percent rise in inflation last year. Inflation will continue its upward course and is expected to jump 2.4 percent in 2018 and 2.3 percent in 2019 as wages inch up with a tightening labor market.
Across the country, the boom in housing construction, which was so hot between 2012 and 2016, seems to be dissipating with only 0.017 percent growth last year in construction.
That’s because millennial workers are flocking to urban centers, such as downtown Los Angeles, and living in apartments or condominiums rather than populating the suburbs. The anemic growth in new housing is predicted to continue through 2019, particularly if there is a drastic rise in interest rates.
Unemployment rates across the country will continue to fall, going as low as 3.9 percent in 2019 from the current 4.1 percent.