Thanks to aggressive virus-control restrictions across California and a rapidly expanding vaccination roll out, the state’s economy will likely bounce back faster than the nation’s as a whole, although lagging tourism will continue to impact hospitality sectors, according to a UCLA economic forecast released Wednesday.
“Since the pandemic-induced recession began last March, we have said that the course of the pandemic, and the public health policy response to it, is critical to the economic forecast,” Jerry Nickelsburg, director of the UCLA Anderson Forecast, wrote in his California report.
“The roll out of multiple vaccines as well as the general easing of the number of new cases from the latest peak suggests a reduced economic impact of the pandemic in 2021,” he wrote. “Though California responded, as before, with more restrictive non-pharmaceutical interventions via mask mandates, closures and gathering restrictions than elsewhere in the U.S., the fourth quarter of 2020 indicates a faster recovery in the coming year.”
The forecast downplays suggestions of a major exodus of businesses from California in response to the pandemic and the accompanying restrictions, with the report finding that “the data do not support permanent out- migration.”
“Although the timing may be offset with California beginning a significant recovery later than some other states, we expect the California recovery to ultimately be, once again, faster than the U.S.,” Nickelsburg wrote. “The leisure and hospitality sector will be the last to recover due to the depth of the decline in this sector and its reliance on international tourism, but the recovery will be earlier in business, scientific and technical services and in the information sector due to the demand for new technologies for the way we are working and socializing, and faster in residential construction as California’s shortage of housing relative to demand drives new developments.”
The report forecasts a first-quarter unemployment rate of 7.7% in California, with the rate falling to 6.8% for the whole of 2021, followed by drops to 5.1% and 4.1% in 2022 and 2023.
Total employment growth for the three years in the forecast is predicted at 5.6%, 3.1% and 2.2%.
“In spite of the recession, the continued demand for a limited housing stock coupled with low interest rates leads to a forecast of a relatively rapid return of homebuilding,” Nickelsburg wrote.
He predicted 127,000 net new housing units this year, rising to 134,000 by 2023.