UCLA Forecast: California economy to ‘muddle through’ early 2026

Construction in San Diego Photo by Chris Stone Times of San Diego The quarterly UCLA Anderson Forecast circulated Wednesday calls for the U S and California economies to muddle through early before beginning to grow again later that year On balance the forecast does not expect an immediate downturn or an immediate resurgence according to the UCLA economists Instead both the nation and the state are poised to muddle through early before experiencing stronger rise in and The forecasters reported tariff-induced inflation agenda uncertainty and a weakening labor arena are slowing the national commercial sector despite optimistic funding in artificial intelligence infrastructure and rising income among high-wealth households The labor field is right now characterized by a state of paralysis and therefore gradual deterioration marked by low levels of both hires and fires noted Senior Economist Clement Bohr And in California the forecasters see a split economic activity artificial intelligence aerospace and other high-productivity sectors continue to expand while construction non-durable goods leisure and hospitality and government-funded services face key headwinds The forecasters also expressed concerns about growing immigration restrictions saying history shows deportations tend to raise unemployment among U S -born and documented workers because of reduced purchases of goods and services New construction in California is also facing headwinds due to workforce shortages tied to deportations tariff-driven materials expense and persistently high financing costs The forecast predicts the unemployment rate in California will peak at early next year average for the entire year and fall to in Residential building permits are expected to rise from this year to in We continue to live in an era of elevated uncertainty concluded Bohr Not only does economic strategy continue to fluctuate as evidenced by shifting tariff schedules but the longest regime shutdown in history means that we have been partially blind as to how the financial market has been unfolding over the fall The UCLA Anderson Forecast is one of the bulk widely watched and often-cited economic outlooks for California and the nation In March it was the first forecast showing the recession caused by the COVID- pandemic had begun