Just as the California economy seemed poised to return to some semblance of normalcy after COVID, Russia’s invasion of Ukraine has created uncertainty and risk.
That was the conclusion of the UCLA Anderson Forecast in its quarterly economic report released Wednesday.
“Once again, our economic forecast comes with considerable uncertainty,” said senior economist Leo Feler. “It depends on the future course of the pandemic, and it depends on how long the war between Russia and Ukraine will last and whether it will spread to include other countries.”
He said the invasion has “derailed assumptions regarding lower inflation” as energy prices rise and predicted “a substantial increase in federal defense spending” as a result of the fighting.
After national economic growth of 5.7% in 2021, the UCLA Anderson forecast calls for 4.3% in 2022, 2.8% in 2023, and 2.3% in 2024.
In California, the technology, logistics and construction sectors are leading the way with new growth, according to forecast director Jerry Nickelsburg, but the leisure and hospitality industries continue to lag because the pandemic has slowed tourism, and many people still work from home.
Companies may be growing their workforces, he said, but if those workers are not in the office, then restaurants and other businesses dependent on employees gathering in central locations will recover more slowly.
Nevertheless, Nickelsburg expects the California economy to once again to grow faster than that of the U.S. as a whole. He said increased international immigration due to the war and accelerated onshoring of technical manufacturing are upsides.
The forecast said the state unemployment rate is expected to average 5.5% in 2022, 4.5% in 2023 and 4.3% in 2024.
Homebuilding is expected to pickup, Nickelsburg said, with permits for 123,000 new units in 2022 rising to 151,000 in 2024.