California’s Aging Business Cycle and Trumponomics

The story for the California economy, now in its seventh year of economic expansion since the Great Recession, has remained relatively consistent over the past few years. The state is showing signs that it is maturing later into the economic cycle as employment growth moderates. The cost of doing business and living in California remains high as strong job growth, and even stronger income growth, drove up home prices and rents. States like Texas and Florida will likely continue to benefit from their relatively higher affordability, drawing in workers and businesses from the two coasts. Maintaining strong employment growth also becomes a challenge as labor markets tighten and the California unemployment rate drops, now at a current cycle low of 4.9 percent in March 2017. The state unemployment rate is expected to dip even further, down to 4.6 percent by year end.

The near term risk to the California economic outlook appears to be a political one. The California economy is on course to collide with the Trump administration’s agenda over the next few years. A change on H1B visas, NAFTA and immigration enforcement would have a material impact on California’s high-tech, logistics and agricultural industries. California total nominal trade (exports + imports) with Canada and Mexico equaled $115.6 billion in 2016, according to the Census Bureau. The Pew Research Center estimated the total number of unauthorized immigrants living in California at 2.35 million, or roughly 6 percent of the population, in 2014. This fuels a lot of demand for California goods and services, supporting state economic growth.

For a PDF version of the complete California Economic Outlook, click here:  CA_Outlook_0517.


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