Stopping just short of predicting a recession in the U.S. through its 2021 forecast horizon, the UCLA Anderson Forecast, in its third quarterly report of 2019, expects the national economy’s growth to slow to 0.4% in the second half of 2020, before rebounding to 2.1% in 2021.
Given the slow growth rate nationally and the weakness in the housing market, the forecast expects California's unemployment rate to rise to an average of 5.1% in the fourth quarter of 2020. For the entire years of 2020 and 2021, the unemployment rate in the state is expected to average 4.6%.
The report’s national forecast acknowledges a global economy in flux, taking into account the U.S. trade war with China, President Donald Trump's criticism of Federal Reserve Chair Jerome Powell, near-recessionary conditions in Europe, Brexit, slowing economies in Brazil and Mexico, and all manner of rising geopolitical tensions. But despite the fluidity, the forecast does not suggest negative growth.
“Although we are not calling for a recession over the forecast horizon, as we have noted for over a year, it is very likely that economic growth will stall in the second half of 2020 as the effects of the 2017 tax cuts wane and as trade tensions exact their toll on corporate investments,” senior economist David Shulman writes. The national forecast calls for real GDP growth of 2.1% in 2019 and 1.2% in 2020.
The forecast’s report for California ponders why the state continues to outpace the nation in terms of job creation and economic growth. The answer, according to UCLA Anderson Forecast director Jerry Nickelsburg, is found in the growth areas of the state.
“California is outperforming the U.S. for the same reason it has over the past decade; productivity gains through the employment of labor-augmenting technology,” Nickelsburg writes.