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An economic Rebound for California What does this mean for the state’s high rising real estate market?
California was one of the states to take aggressive action to protect its citizen from the Coronavirus pandemic. And this did not only protect the citizens but also made sure that the economy was still afloat. In addition, the efforts against the pandemic set the stage for a much faster recovery, something that cannot be said of some states and countries. In fact, California is showing agility in recovery leading the nation according to a report from UCLA.
Perhaps aiding in the faster recovery is California’s strong technology and white-collar jobs. Still, to add to that, there has been a relatively rapid boost in home building, and all these factors coupled together buoy the economy of California and ultimately offset the slower return from the touristdependent leisure and hospitality sector.
Leo Feler, a UCLA Anderson Forecast’s senior economist said “we are about to have one of the best years of economic growth that we’ve had since World War II.” This unparalleled growth while being recorded in most other states is a remarkable feat for the state that was once crippled by the Pandemic. “We’re looking at a boom time for the U.S. economy.” No doubt that the Covid-19 pandemic was one of the worst health crises we faced this decade but the numbers seem really promising. Nationally, the UCLA forecast shows that the gross domestic product will spike 7.1 percent this year tapering to 5.0 percent in 2022 followed by s steady growth of 2.2 percent in 2023. What makes this a unique recovery is its rapid pace!
It is even more remarkable if we compare this rate of recovery with the 2007-10 recession. However, there were some measures enacted which perhaps better explain the rate of recovery for both the state of California and the nation. Chief among them was the pandemic stimulus and the spending programs that were enacted by the government shortly after Covid-19 was declared a public health in the country.
Taking this case close to home, the state lost almost over three-quarters of its jobs. Most of these jobs were in the category where we have a high degree of human-to-human contact, for instance in the leisure and hospitality sector, in the retail sector, and many others which primarily fall in the services category. The governor did something interesting, he eased the business restrictions with the state resuming full operations in mid-June.
Still, while this is good news for the state, the unemployment rate will remain among the key concerns for the state “because California is a more entrepreneurial state with a younger population,” Jerry Nickelsburg, the forecast director said. “People earlier in their career tend to have more unemployment.”
The forecast report predicts that by the end of the year, the state’s rate of unemployment will average at 5.9% compared to the national average of 4.5%. While that raises concerns, it is important to highlight that the state is expected to add jobs faster than the national average. In fact, UCLA predicts that by the end of the year 2023, unemployment will average at 4% compared with the 3.7% nationally.
Despite a shared optimism not just by the UCLA economists but by also some 71 economists surveyed by Bloomberg who projected a 6.6% GDP growth, we still face uncertainty especially given the fact that Californians are set to leave the state for regions with lower costs of housing. This ultimately will affect the rate at which recovery happens in the country. Nevertheless, this exodus might be proverbial especially after the fact that there is a spike in residential construction triggered by the housing shortage and low-interest rates. It is estimated that by the end of the year 2023, at least some new 391,000 units will be built. It is a positive step in the right direction, but still not enough to solve the state’s dearth of affordable units.
Data Sources
https://www.latimes.com/business/story/2021-06-02/lafi-california-economy-recovery-ucla-forecast-june-2021 https://laborcenter.berkeley.edu/california-cant-affordto-repeat-the-great-recession-state-spending-iscritical-to-economic-recovery/ https://calmatters.org/commentary/my-turn/2021/05/ california-leads-our-national-recovery-despiteperpetual-naysayers/
