California's economy continues to grow. How would a recession affect it?

  • In Business
  • 2022-12-07 09:00:00Z
  • By Sacramento Bee

A national recession would have a milder impact on California than the rest of the nation, a new UCLA Anderson School economic forecast said Wednesday.

"In the recession scenario, the California economy declines, but by less than the U.S.," said Jerry Nickelsburg, forecast director, thanks, in part, to continued growth in the state's technology and logistics areas.

The Federal Reserve is seen as having a strong affect on the economy's future. The Fed has been raising its key interest rate throughout this year, and expects to do so again next week, as it attempts to ease inflation.

Its actions are aimed at slowing economic growth, which some forecasters see as triggering a recession.

The UCLA forecast looks at two scenarios: one involving more aggressive Fed action, the other a more moderate course.

But, the UCLA forecast said, "The good news is that unlike the past four slowdowns in economic growth, we expect a milder impact on California's economy whichever path the Federal Reserve decides to take." Any national recession, the forecast said, would be "relatively mild and brief."

Should the economy continue to grow, in what economists call a "soft landing," UCLA saw California's economy growing faster than the nation's.

The state would be "led by more construction, an ample rainy-day fund for state government, increased demand for defense goods, and increased demand for labor saving equipment and software."

California's job levels are now higher than before the pandemic sent the economy into a tailspin in March 2020, but there is a difference between jobs now and then.

The forecast found about 170,000 payroll jobs in leisure and hospitality, as well as other services, have disappeared.

But in technology, logistics, and health care, "rapid job creation has numerically made up for more than the … job loss." Logistics can involve the movement of goods through the state's ports and airports.

One of the areas suffering from the higher interest rates is housing. Yet the report found construction employment in California "relatively strong."

The forecast saw "strong demand for continued warehouse and other industrial building."


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