F-35 under construction
F-35 fighter components under construction at a Northrop Grumman plant in Palmdale. Courtesy of the company

California continues to lead the nation in job growth, and will benefit from the big increase in the defense budget over the next several years, according to the latest UCLA Anderson Forecast.

In its first-quarter report, released Wednesday morning, the respected forecasting team projects the Golden State’s employment will rise 2.2 percent this year, 1.7 percent in 2019 and 0.9 percent in 2020.

Much of that growth will be driven by new demand for high-tech defense equipment from California like General Atomics’ drones and Northrop Grumman’s new B-22 bomber.

“The increase in investment is likely to be in technologically advanced equipment and software. Thus, the California tech industry will see a bump in demand,” said Forecast Director and Senior Economist Jerry Nickelsburg. “To achieve this, more labor will be needed and wages will have to increase to draw the labor in, either from the sidelines or from outside the state.”

For the nation, the forecast identified a definitive “regime change,” with the economy moving from one of sluggish growth and low inflation to one of accelerating growth and moderate inflation.

A growth rate of 2.9 percent is expected for 2018, but will slow to 2.6 percent in 2019 and a sluggish 1.6 percent in 2020.

Why the slowdown? “Simply put, the economy is already operating at full employment and is bound by slow labor force growth and sluggish productivity,” said Senior Economist David Shulman.

The forecasters said new tariffs on steel and aluminum could slow economic growth and raise inflation.

“Instead of improving the situation, the Trump Administration proposals to increase tariffs on steel and aluminum will actually make things worse as domestic costs rise and foreign producers retaliate,” said Shulman.

Although housing activity will continue to expand through 2019, it will be far from a boom, thanks to higher interest rates and higher home prices. The forecast anticipates 1.3 million units in 2018, 1.38 million in 2019 and 1.36 million in 2020. Home building in California will accelerate during the period to about 138,000 units in 2020.

Chris Jennewein

Chris Jennewein is Editor & Publisher of Times of San Diego.