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Economic Insights from Coachella Valley: 2013 U.S. and California Forecast

At the Coachella Valley Economic Forecast Conference on April 11, 2013, Jerry Nickelsburg, Senior Economist at UCLA Anderson, discussed critical themes affecting the U.S. and California economies. He highlighted slow growth projections of 1-3%, the dichotomy of "Two Californias" regarding employment and housing, and ongoing fiscal imbalances. The forecast anticipates gradual recovery post-2014, emphasizing risks from inflation and fiscal policies. The impact of Prop 30 on California's economy, including potential revenue swings, was also examined, shedding light on future economic challenges.

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Economic Insights from Coachella Valley: 2013 U.S. and California Forecast

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  1. Coachella Valley Economic Forecast Conference The U.S. and California Jerry Nickelsburg Adjunct Professor of Economics Anderson School of Management Senior Economist UCLA Anderson Forecast April 11, 2013

  2. Main Themes • The US: Muddling Through with 1-3% Growth • The Two Californias • Employment • Housing • Economic Forecast • Are People Leaving California? • Economic Consequences of Prop 30

  3. GDP Growth Remains Slow

  4. Tepid Consumption Growth : 2%

  5. Housing Momentum Gaining Strength

  6. Business Construction: Pause, then Renewed Strength

  7. Hard to export with trading partners in recession

  8. Long-Term Fiscal Imbalances Remain Federal Surplus/Deficit, FY 2000 – FY 2022

  9. Interest Rates on the Rise

  10. Inflation Becoming More of a Risk

  11. The Fed Balance Sheet: To QE and Beyond

  12. U.S. Forecast • Slow Growth • But, we will likely avoid a contraction. • Gradual growth to return in mid-’14 • Downside risk: • Inflation and Monetary Policy (remember 1981) • More Fiscal Restraint (remember 1937)

  13. The TwoCalifornias

  14. The Geography of Unemployment

  15. Job growth is uneven

  16. Payroll Jobs Continued Slow Growth -1,361K 719K

  17. But Most Sectors Are Gaining

  18. Construction Strength Continues to Build Source: CIRB, US Census, UCLA Anderson Forecast

  19. But, home sales just beginning to increase Source: DataQuick

  20. Foreclosures keep falling but distressed sales less so Source: DataQuick, UCLA Anderson Forecast

  21. How will This Bifurcated Economy Affect Population In California? • Current Population Estimates • Some Facts • Inland : High Unemployment, Housing Markets Not Healthy, Slow Job Growth • Coastal: Unemployment Relatively Low, Housing Markets Improving, Fast Job Growth • Some Data • United Van Lines • U-Haul • Driver’s Licenses

  22. CALIFORNIA FORECAST 2013 2014 2015 Payroll Employment 1.4% 2.1% 2.3% Unemployment 9.6% 8.4% 7.2% Personal Income 1.4% 3.6% 3.3%

  23. Volatility Risk and Prop. 30

  24. Economic Consequences of Prop. 30 • Prop. 30 gives CA an opportunity to eliminate wide swings in revenue • But, it holds the risk of more severe swings. • Average time between recessions is 5 ½ years. We hit that average in 2013! • Longest is 10 ½ years. We hit that in 2018! • A CA Risk to the Forecast: No Tax Reform

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