Fleet oilers at NASSCO
John Lewis-class fleet oilers under construction at NASSCO as California’s defense sector grows. Courtesy of the shipyard

The latest UCLA Anderson Forecast released Wednesday finds the U.S. economy is not in recession and California continues to outpace the nation, but cautions that aggressive monetary policy could quickly change the situation.

“With core inflation coming down slowly, it’s possible the Fed may continue to tighten monetary policy until we’re in a recession,” warned the widely followed quarterly forecast.

The forecast presented two scenarios for both the U.S. and California economies. Forecast director Jerry Nickelsburg cautioned this is not a case of “choose your own forecast,” but acknowledgement of the “unknown impact of aggressive and possibly continuing interest rate increases on the part of policymakers.”

Whatever happens, the forecasters anticipate a milder impact on California’s economy.

“The good news is that unlike the past four slowdowns in economic growth we expect a milder impact on California’s economy from whichever path the policy actions by the Federal Reserve takes the U.S. economy,” according to the forecast.

If there is a recession, the California economy declines, but by less than the U.S. economy. In this scenario the unemployment rates for 2023, 2024 and 2025 are expected to be 4.4%, 4.8% and 4.6%, respectively.

Softening the impact of a recession in California are more construction, an ample rainy-day fund for state government, increased demand for defense production, and increased demand for labor-saving equipment and software.

Recession or not, the forecasters expect the California economy to “continue to grow and grow faster than the nation’s.”

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