California Economic Forecast

The consensus forecast for 2021 is very rosy, with economists expecting GDP to expand by 4.0 percent. But can we really count on such a strong outcome? There is an emerging narrative that after receiving both vaccine doses, we will still need to wear masks and social distance. I’m just guessing but in view of the very cautious approach we have observed in California since July regarding limited business openings, a continuation of a regime of restrictions for much of calendar... 2021 would not be surprising. If there are persistent restrictions on businesses during 2021, a robust recovery will not be possible. Read more: https://californiaforecast.com/january-2021/

2020 may be winding down but housing demand is turning up. Just as we enter the typical winter lull, demand for housing actually appears to be rising. Nationwide, it’s approaching the highs of the housing bubble era, with mortgage applications surging in November and December. In California, the number of house hunters has been climbing for several weeks and is rising faster than similar data nationwide.... It appears that home prices are falling into a more affordable range. The median selling price has depreciated meaningfully since August and September, and listing prices have fallen even faster. Mortgage rates keep setting lower new records each week, and even though prices are still 15 percent higher than they were at the beginning of 2020, the typical mortgage payment on the median priced home is only up by 1 percent. Bargain hunters have emerged from hiding, pushing up demand. At a time when inventory is declining, we wouldn’t be surprised if another increase in selling prices follows. What the last few months has shown is that home buyers have become more sensitive to price, largely because of how prices have behaved this year, rising much more sharply than in the previous 2 years. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

California’s new Stay at Home order will slow down the economic recovery, not reverse it. The new restrictions cover 99% of the CA population and prohibit outdoor dining and indoor gyms. They close hotels to everyone except critical workers and limit retail to 20% capacity. Leisure/hospitality will lose jobs in Dec-Jan, and some businesses will close completely.... But the leisure sector was already below its pre-pandemic employment level, and there aren’t too many more jobs to cut. There will be weakness in retail, with fewer jobs gained than during a normal holiday season, and CA could shed more jobs at schools & govt agencies. But we don’t see a W shaped economy where growth turns negative again because virtually all other industries should keep expanding. Professional & biz services will be largely unaffected and should grow in Dec-Jan. Warehousing/delivery could surge as Xmas shopping moves online and everyone gets takeout with DoorDash & Grubhub. There is a real chance that total employment will contract, pulled down by weakness in leisure/retail, but it is unlikely that any economy-wide losses will be large enough to cause a double-dip recession. Rather, it will probably be a blip as we wait for mass immunization, at which point the economy could soar. More here: https://californiaforecast.com/covid-19-economic-analysis/

The vaccine is here. Starting the week of December 13, vaccines will arrive around the country. The US government has purchased enough of the Pfizer vaccine to treat 150 million Americans, and has the option to purchase 400 million doses of the Moderna vaccine in 2021. Moncef Slaoui, head of Operation Warp Speed, stated that a third of the US population should be vaccinated by March, with another 100 million doses arriving in the April-June period.... The AstraZeneca vaccine will likely be used in Europe first, before being adopted in the US to supplement the Pfizer and Moderna vaccines. Slaoui expects the AstraZeneca vaccine will be approved in late February in this country, with another two vaccines to also be approved in February. By March, we expect a marked improvement in case counts and hospitalizations, and we suspect state authorities will begin loosening restrictions as the case data improves. The conventional wisdom has the US economy expanding 3.5 to 4.1 percent in 2021. Most of that growth occurs in the 2nd half. However, economists are generally optimistic that businesses will be able to operate more freely as the vaccines become widely distributed. The Q1 GDP forecast is modest but still positive at 1.8 percent, and growth should only accelerate from there. More here: https://californiaforecast.com/covid-19-economic-analysis/

We’re expecting a busy California ski season, but ski town budgets could still be in trouble. Virtually all of California is under new Stay at Home orders, but the ski slopes are open, meaning that lockdown-fatigued skiers will flock to the mountains. But most hotels are closed to everyone except essential infrastructure workers, so Californians must plan on single day visits to ski resorts.... In California ski towns, hotel taxes represent a huge share of general fund revenues. In Big Bear Lakes it’s 30%. In South Lake Tahoe it’s 40%. Mammoth Lakes generates 66% of revenues from hotel taxes. On top of losses from overnight visitors, Mammoth Lakes could lose sales taxes because we expect a much lower number of travelers to Mammoth this year. Why? The only major population center within a few hours is Reno, which has just 400,000 residents. By contrast, there are 10 million people within day-trip distance to Tahoe and 24 million near Big Bear. Without lodging options, visitors from Southern California or the Bay Area face long drives to Mammoth, and far fewer than normal will make the trip. The only skiers this year might be locals, people who own a second home in the area, and rule breakers who rent an Airbnb or sleep in their car. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

The second Coronavirus wave represents a potentially large threat to the economy, if state governments choose to meaningfully restrict business operations. And many have to date. But the vaccines are here. Operation Warp Speed has delivered, and millions of inoculations will begin this month.... The beacon of light that will enable us to be freed from the personal and economic shackles of COVID-19 begins now. Read my thoughts on the Coronavirus and the economy in our December Newsletter: https://californiaforecast.com/december-2020/

Will the new COVID surge dash economic improvements to date? There is now a resurgence of coronavirus cases in the world, especially in Europe where a second wave of the virus is raging. The U.S. is bracing for higher case surges than what has already occurred, particularly in the mid-western states where the weather has chased people inside.... Rehiring has resulted in the restoration of just over 50 percent of all jobs lost in the March-April period, and there have now been 5 consecutive months of new job creation. There are headwinds however, and unless or until we see more relief and stimulus from fiscal policy and better therapeutics and the much heralded vaccine, the economy will recover selectively, and only marginal improvement should be expected. Read more in our November Newsletter: https://californiaforecast.com/november-2020/

The Coronavirus Recession is impacting city budgets across California. We’ve been working with the California State Auditor to identify cities at risk of fiscal distress, and the results are in. Virtually all city budgets will be impacted by the recession, and some will be impacted significantly. Revenue declines could exceed 20% of total expenditures in more than 30 cities, and at least 10 cities may have to cut services during FY 2021, which we are in now. Revenue shortfall...s will be largest in cities that rely heavily on hotel taxes, parking taxes, and admission taxes for live events. The City of Indian Wells relies heavily on admission tax revenues from the BNP Paribas Open, a professional tennis tournament held in March. It was cancelled in 2020 and it might be cancelled again in 2021. Consequently, the city is facing major revenue risk. Anaheim, home to Disneyland and California Adventure, faces substantial declines in bed taxes. Without intervention, Anaheim could exhaust its fiscal reserves before the amusement parks can re-open. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

If you don’t like the housing market right now, just wait a few months, because it seems to be changing in tandem with the weather in California. We went from a tepid spring to a hot summer to a cooling fall.... In a surprising twist, inventory is now expanding, because more owners are listing their properties and fewer buyers are hunting for deals.... Since mid-September, there has been a huge increase in the number of homes newly listed for sale, and new listings are now 28 percent higher than they were at the beginning of the year. Homeowners that deferred listing their properties in March, April, May and June are now collectively doing so, because they’re tired of waiting and because prices are so much higher. In general, inventory increases today are backfills from postponed activity. At the same time, the number of house hunters has gradually diminished, which is typical as the calendar draws closer to the holiday months. This combination of events indicates that new supply is outpacing incremental demand. And whenever supply exceeds demand, price appreciation begins to moderate. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

So much for the V-shaped recovery. We’ve been warning you that a quick rebound in economic activity was improbable when the Spring lockdowns extended into mid and late May in Mudville, aka California. And when the economies opened up partially and everyone breathed a sigh of relief there was genuine hope that men would laugh and children would shout. But so far there has been no joy in Mudville.... Read more in our October Newsletter: https://californiaforecast.com/october-2020/

Weekly unemployment remains stuck at 15 percent in California. The labor market report for August was presented today by the State of California. The official unemployment rate fell to 11.6 percent, but inconsistencies in the report imply that this preliminary August estimate of the California labor market includes misclassification errors of surveyed unemployed respondents. Though COVID-19 cases are declining nearly everywhere in the State, along with hospitalizations and fa...talities, the limitations on business remain onerous, and perhaps somewhat arbitrary. During August, the state created 102,000 jobs. After a closer look at which sectors contributed those new jobs, it appears to be mostly federal and local government offices. They account for 67 percent of the jobs created. The federal jobs are temporary Census workers. These jobs will likely only last through October or no longer than November. Because of the business reversals that went into full effect by July 13, the report shows that the other services industry, which includes salons and barbershops and gyms, and the leisure/hospitality sector that includes restaurant and bar worker, lost jobs in August. Read my full analysis here: https://californiaforecast.com/covid-19-economic-analysis/

What are the expectations for the California economy in 2020 and beyond? The performance of the California economy has severely lagged other states. We have one of the highest unemployment rates in the U.S., our rebound in consumer activity has been below average, and we have recovered far fewer jobs than other areas. California has a new reopening plan, and it's very strict. As of today, 33 counties representing 71 percent of the population remain in the most restrictive tie...r for business activity, which will prevent the recovery from substantially accelerating until December, or later. Even if the pandemic were to suddenly end tomorrow, the economic carnage to date would be both irreversible and not yet over. Expect a challenging fourth quarter for the economy, and particularly small businesses, in California. Read the full September Newsletter here: https://californiaforecast.com/september-2020/

We are moving sideways . . . Unemployment remains high and the improvement in the nation’s labor market is marginal. In California, there was some improvement in July and less (if any) improvement in August. Today’s EDD report showing the California unemployment rate declining to 13.7 percent is misleading. The latest unemployment claims report (from last Saturday) shows that 3.1 million Californians are drawing unemployment benefits and this number has been virtually unchang...ed over the last 4 weeks. Our estimate of weekly unemployment for the week ending August 15th was 15.5 percent. This estimate does not suffer from some of the misclassification issues associated with how the monthly labor market survey counts unemployed workers. California recipients of unemployment payments now represent 20 percent of the nation’s total, yet the state’s population represents just 12.2 percent of the nation. Clearly, the disproportionality of unemployment benefit distributions to Californians is due to a more restrictive economy here. Full commentary here: https://californiaforecast.com/covid-19-economic-analysis/

Despite a record decline in employment and massive uncertainty about where the economy is headed, housing prices are surging in most areas of California. Why? Demand is high, interest rates are low, and there are fewer homes for sale than at almost any other time in the last few decades. As of August 19th, there were 37,999 single-family homes for sale in California. Other than a brief period in the year 2004, housing inventory has never been sparser.... House hunters are now forced to compete for a shrinking number of homes, giving sellers the opportunity to raise prices. And sellers have been taking advantage. Since the first week of January, the median price for a home in California has risen by 18 percent. But because interest rates are also near record lows, the mortgage payment on the median priced home has increased by only 8 percent. Fewer buyers have been pushed out of the market than headline data would suggest. Earlier in the Coronavirus Crisis, we predicted that the housing market would be weighed down by massive unemployment, a record number of business closings, and the end of fiscal stimulus. However, there is no convincing data to suggest that housing has been traumatized by these events. More here: https://californiaforecast.com/covid-19-economic-analysis/

Our weekly economic evaluation indicates some reasons for optimism, but also includes some signs that the recovery is still in danger. The states rolling back their reopenings is principally contributing to the duration of elevated unemployment in the nation today. It has also resulted in a flattening of consumer spending growth from mid June through August 2. Because of reversals, and the end of the federal unemployment benefits on July 31, a drag on the growth in spendable ...income will occur going forward. University of Michigan Consumer Sentiment for August has not improved. In the face of increased infections throughout the U.S. leading to business opening reversals, confidence in either present or expected economic conditions is not rising. Another coronavirus relief bill is likely, not this month but in September, and likely smaller than the first. However, the absence of stimulus in August will weigh down GDP growth and hiring. The pace of hiring has already moderated. And unemployment benefit recipients remain very high. Unemployment insurance claims are improving gradually in the nation, but not so in California, which still represents the most business-restricted state in the nation. Full analysis here: https://californiaforecast.com/covid-19-economic-analysis/

The U.S. weekly unemployment rate increased slightly last week, rising to 12.7 percent. The unemployment rate for California held steady at 15.8 percent. During the entire month of July, there was virtually no improvement in labor market conditions nationwide, and conditions in California deteriorated. The BLS jobs report will be released tomorrow, and there’s a good chance it will be highly disappointing.... Follow our ongoing COVID-19 economic analysis here: https://californiaforecast.com/covid-19-economic-analysis/

The reversals have slowed the economic recovery. The strong recovery we observed in May has weakened and the economy is now moving sideways, at best. GDP growth from the peak quarter (2019 Q4) to the second quarter of this year was negative 11 percent. On an annualized bases, the economy was down 33 percent in Q2 alone. Economic growth will rebound in the third quarter but the labor market will be slow to follow. Because of the ongoing restrictions, the unemployment rate will... remain elevated and is already increasing again in California. Read the full August Newsletter here: https://californiaforecast.com/august-2020/

A lack of Congressional action just sent us over the fiscal cliff and 32 million people will lose their federal unemployment payments. Total personal income will decline by 4% over the course of a week. For perspective, personal income fell by 8% during the entire 2008-2009 recession. Will consumer spending also decline by 4%? Probably not. A high share of those $600 payments were saved, not spent, and many households probably have a financial cushion.... Some people will return to their jobs now that they can’t earn a sustainable income while staying home, but job postings tumbled in July so there won't be many jobs to return to. It’s hard to imagine that consumer expenditures will keep rebounding. It’s not clear what the next rescue bill will include, or when it will become law, leaving unemployed workers in the lurch. The uncertainty of when their next paycheck will arrive will cause people to tighten their belts and spend less. How much runway do we have before we relapse into another broad economic contraction? We are monitoring the major indicators and they don’t look great. Every week that passes without a worker aid package pushes us closer towards a double dip recession. More here: https://californiaforecast.com/covid-19-economic-analysis/

The recovery remains shaky. The weekly unemployment rate for California continues to push higher after initial claims for unemployment benefits by wage and salary workers rose by 8,000 in the week ending July 18th. The unemployment rate is now at the highest level since the economy reopened in mid-May. The recent shutdown of indoor restaurants, gyms, museums, and personal services has contributed to rising claims. The national unemployment rate for the week ending July 18th r...emained constant at 12.6 percent. The national index of leading indicators improved in June, rising 2 percent, which was the result of diminishing claims for unemployment during the month and a rising stock market. Existing home sales rose 21 percent in June, rebounding sharply from the month of May. Consumer sentiment declined this month, probably due to the pauses and reversals in the reopenings of state economies throughout the nation. The University of Michigan survey indicates that consumers have soured on how they expect economic conditions to evolve this year. COVID-19 remains a wildcard for how the economy will create meaningful opportunities for jobs, income growth, and activities for spending. See our ongoing Coronavirus Recession coverage here: https://californiaforecast.com/covid-19-economic-analysis/

The labor market improvement has been set back by renewed shutdowns. The lack of significant improvement in the nation’s unemployment totals likely reflects the pausing or reversal of re-opening plans in some states and California counties. This is in response to rising daily COVID-19 cases. If the current outbreaks lead to further lockdowns of business in counties and states, then regional economies will struggle and small businesses will close, leading to a resurgence in la...yoffs. There are now 21 percent fewer small businesses open in California than there were in January of this year. Progress was being made since the low point in mid-April but the recent mandatory shutdowns of bars, wineries, breweries, dine-in restaurants, and theaters in 26 Counties has resulted in a meaningful closure of small businesses over the last week. More here: https://californiaforecast.com/covid-19-economic-analysis/

Our July newsletter, out yesterday, covers are our thoughts on the status of the recovery and the economy during the summer of 2020. We are assuming that the recession is now technically over, because growth in employment, payrolls, and spending has resumed. The reopening of many U.S. state economies has led to a gradual economic pickup.... But because the reopening is limited to specific business sectors and with capacity limitations it will produce a limited and temporary boost in demand. People still find their movements and options to spend severely restricted. Read the full newsletter here: https://californiaforecast.com/july-2020/

The June labor market report form the BLS showed millions of job gains and a falling unemployment rate, but monthly data has become a lagging indicator and does not always capture current economic conditions. As we reported last week, we are becoming increasingly concerned about the outlook for August and September, and real-time evidence suggests our concerns are warranted. The California unemployment rate that we estimate each week has been rising for over a month, and now ...the U.S. rate is increasing too. Cell phone tracking data indicates that fewer people were commuting in late June compared to late May. Cell phone tracking data has been an accurate predictor of consumer spending, and people are now taking fewer trips to stores, hotels, restaurants, and other retail/recreational locations. Reduced spending is likely to follow. Hiring could decrease in July unless the recent orders to re-close businesses are removed. We will keep you posted as new information becomes available. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

The labor market recovery is looking stagnant. We are now 7 to 8 weeks into the re-opening of the U.S. economy and the unemployment rate has failed to make meaningful improvements. In California, the unemployment rate is still generally moving higher in a disappointing sign of weakness for the statewide economy.... If the re-opening of the economy does not speed up, more demand from consumers does not materialize, or the rising rate of infections leads to another lockdown, there is a rising likelihood that the U.S. economic recovery could turn into another contraction. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

The weekly unemployment rate held constant in the nation, but has been rising in California. While initial claims for unemployment insurance on a weekly basis are clearly in decline nationally, the declines are getting smaller and smaller. In California, initial claims moved slightly downward but continuing claims moved higher. Relative to other states, the California economy is still not as open. Tourism destinations are just now starting to re-open, such as Yosemite Nationa...l Park. We are 13 weeks into the economic crisis caused by the pandemic. Unemployment is still at enormous levels. The PPP Flexibility Act (signed into law on June 5) gives businesses more time to spend the PPP funds on employee payrolls and employers can delay rehiring until demand for their products or services makes it worthwhile to restore workers. Consequently, millions of workers will remain unemployed and this will keep the unemployment rate high through June and likely through July. To the extent that distancing and capacity restrictions can be phased out, the economy would bounce back more quickly, making more hiring a clear necessity. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

It’s probable that the economic recovery will continue into the fall and winter, but the economy will have to overcome some obstacles. We are watching 4 issues that could impede the recovery or lead to an extended recession. 1. Another reduction in consumer spending 2. An escalation in business failures and personal bankruptcies 3. An acceleration in layoffs at state/local governments... 4. Another round of lockdowns Yesterday’s retail sales report showed a large rebound in activity, but the increase was largely supported by government stimulus. The $600/weekly unemployment checks have increased incomes to record levels, boosting the spending ability of unemployed workers. Stimulus funds aren’t going to last forever, and when they wear off the economy could experience another contraction in consumer activity. As of now, federal unemployment funding will end on August 1st, a time when there will still be millions of unemployed workers, and it will be critical to observe how consumers react when this major source of income is depleted. Consequently, we are fairly concerned about another downturn in consumer spending, and we will cover the remaining scenarios over the next few weeks. Read our ongoing analysis here: https://californiaforecast.com/covid-19-economic-analysis/

Is the labor market rebound stuck in neutral? The weekly U.S. unemployment rate has been virtually frozen near 16 percent for the past 4 weeks, and the unemployment rate in California has begun to increase again. But aside from the weekly unemployment rate and initial unemployment claims, virtually all other data shows continued progress in job market conditions. The number of hours worked at small businesses has continued to improve, showing that employers have the confidenc...e to re-hire former staff. Job postings turned upward very sharply in early June, indicating that companies are ready to hire even more workers. But the failure of the unemployment rate to decline could be a warning sign that needs to be taken seriously. Consumers are still spending less than before the pandemic, the unemployment rate is still unacceptably high, and there are a number of major risks to the economic outlook. See our ongoing COVID-19 analysis here: https://californiaforecast.com/covid-19-economic-analysis/

The unemployment rate held steady at 15 percent last week after a sharp improvement during the week of May 16th. There are now only 575 counties that are still shut down, and these counties account for less than 15 percent of nationwide GDP. Just a month ago, the 2,600 counties that were shut down represented 30 percent of GDP. The reopening process, along with PPP loans and other fiscal/Fed support, have brought millions of people back to work and put the economy into reboun...d mode. Read more: https://californiaforecast.com/covid-19-economic-analysis/

California unemployment rates have moved higher in the tourist destinations than the tech-heavy regions. Los Angeles County was hit the hardest. Not only did it record one of the higher unemployment rates among regions in the state (20 percent), the change from last year was the highest, close to 16 percentage points higher. Regionally, the biggest increases occurred in the coastal counties that disproportionately serve visitors (or are home to workers in the tourism industri...es). Regions with larger increases may struggle more to recover from the recession because they have suffered more from permanent layoffs today. Read the full analysis here: https://californiaforecast.com/covid-19-economic-analysis/

After rising above 18 percent for the first time in a century, the U.S. unemployment rate has decreased for three consecutive weeks. As of May 16th, approximately 15 percent of the workforce was unemployed. In California, the estimated weekly unemployment rate declined to 21.7 percent.... Improvements in the unemployment rate match data showing the number of hours worked at small businesses. Employee hours had declined by as much as 56 percent during the first weeks of the Coronavirus Recession, but have steadily increased and are now only 32 percent below the number of hours worked in February. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

The recovery appears to be underway. The unemployment rate peaked in late April and began to improve in the first week of May. Is this the beginning of the end for the labor market crisis? Will the re-hiring process accelerate from here? That is still a large unknown, but right now the evidence does suggest that the labor market is better today than it was yesterday. At this point, evidence of a business cycle turning point is becoming more convincing. There is still great un...certainty about the dynamics of the recovery, and there is concern that the rebound will be meager and/or short lived if virus infections begin to turn up again or businesses failures intensify. But it’s now clear that the recovery has started because a myriad of indicators have begun to turn positive. More data and analysis here: https://californiaforecast.com/covid-19-economic-analysis/

The weekly unemployment rate ticked up slightly in the U.S. and California. A few days ago we speculated that the recession would end soon and the unemployment rate would begin to decline within the next few weeks. There is mounting evidence to support this prediction, and there is new data showing that certain sectors have likely bottomed.... But this recession is all about jobs, and for the week that ended May 2nd, the unemployment rate continued to increase very slowly. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

How will the economic recovery start? Restarts have now occurred in 20 states, and more are opening daily. By the end of the month, nearly all states will have restarted many sectors of their economies. Re-opening does not occur without major unknowns. How many customers will be back? How many customers can be accommodated in a day? Will there be enough sales to justify the operating costs under stringent protocols that limit customers? How many workers can be hired and how c...an they be safely kept healthy? Uncertainty is a corrosive influence on businesses, as it hampers planning and investment decisions. With so much uncertainty surrounding the opening of the economy, businesses will move cautiously over the next few months. We can’t predict how the recovery will go yet, only that it has started. As we gain clarity on the distancing rules and protocols, we’ll be able to evaluate the speed at which the recovery might evolve, so stay tuned for updates. See our COVID-19 update page here: https://californiaforecast.com/covid-19-economic-analysis/

The rock bottom of the crisis on the economy has probably been reached, and right here and now, we believe we have moved to the recovery phase of the recession. Read why in our May newsletter: https://californiaforecast.com/may-2020/

This week could be the bottom of the recession. The indicators measuring the extent of the economic contraction continue to be shocking, but over the next two weeks, the unemployment rate will likely decline as the fiscal rescue programs pick up speed and parts of the country reopen their economies. As of April 21st, approximately $175 billion in loans had been distributed to small businesses through the Paycheck Protection Program, and another $174 billion should be on its w...ay. The Fed plans to lend several trillion dollars to businesses and government agencies, and most of this funding has yet to be released. Congress has already replenished the PPP program with an additional $310 billion and the House of Representatives is proposing up to $1 trillion in aid for state and local governments. All said, the amount of stimulus that is about to hit the economy exceeds anything on record. And it will arrive just as more states begin to lift their lockdowns. It is highly likely that we have reached a bottom and conditions could begin to improve within weeks. Full analysis here: https://californiaforecast.com/covid-19-economic-analysis/

The first round of PPP loans could fund 39.4 million jobs, exceeding the 38.2 million layoffs that have been recorded to date. A high share of funding has gone to sectors hit hardest by the shutdowns, such as accommodation and food, retail, and construction. But other sectors have received loans to fund more jobs than they have actually lost to date, indicating that these loans will be used to maintain existing payrolls.... In California, the circumstances are strikingly different. There have been an estimated 4.9 million layoffs in March and April, but PPP loans issued to California firms will support only 2.9 million jobs. Full an analysis here: https://californiaforecast.com/covid-19-economic-analysis/

The unemployment rate for California soared to 22.3 percent last week when another 554,000 claims for unemployment insurance were filed by COVID-19 impacted workers. The unemployment rate for the U.S. jumped to 19.7 percent. These rates are the highest ever recorded since the Great Depression but may be near the peak that we observe during the Coronavirus recession.... Read more: https://californiaforecast.com/covid-19-economic-analysis/

Inventory is the real estate indicator to watch. For-sale housing inventory has deteriorated faster than other components of the residential real estate market, but it appears to be stabilizing. Home sales have declined as well, but so far the lockdowns have impacted sales much less severely than listings. Why? Because many contracts were signed in the first half of March, before the magnitude of the Conoravirus recession was apparent. In this environment, sales appear to be ...following inventory trends with a one-month lag, and we expect April transactions to show strong declines. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

The U.S. unemployment rate moved slightly higher over the last week, reaching 18.8 percent for the week ending April 11th. It is still uncertain how long the shelter-in-place orders will remain in effect, but even before the orders are lifted, the unemployment rate could begin to decline. How? Because firms may begin re-hiring their workers during the second half of April, bringing people out of the ranks of the unemployed.... More here: https://californiaforecast.com/covid-19-economic-analysis/

How will we recover from the Great Coronavirus Shutdown? Full recovery will occur when everyone is tested for COVID-19 and/or a vaccine is developed. Until then, there is a low likelihood that the economy can bounce back strongly (the V scenario). The recovery therefore takes the form of a leftward tilted L: a sharp and deep contraction followed by a meek recovery limited by consumer caution and reticence, and government required protocols that increase spacing, constrain c...apacities, and disallow dense human gatherings. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

We have updated our layoff estimates for March, and new data suggests that there were 3.1 million layoffs across California, representing more than 15 percent of the statewide job market. But not everyone has been able to apply for benefits and there is a backlog of unprocessed claims. Through the end of March there were only 1.3 million active unemployment insurance claims in California. It has been very difficult for anyone to actually file a claim, with reports of busy sig...nals and crashing websites. Delays in receiving benefits leave the economy vulnerable to a deeper recession with a more prolonged recovery. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

Almost 30 million people are now effectively unemployed. We keep discussing this situation as unmatched, unparalleled, and unprecedented, because there’s really no other way to describe it. The unemployment rate has risen from 4.4 percent to 17.3 percent in just 3 weeks, and while most of the world is beginning to grasp the potential depth of this contraction, the historical comparisons remain mindboggling.... Read more here: https://californiaforecast.com/covid-19-economic-analysis/

Not all layoffs are the same, and we’re watching layoff data for clues on the type of recovery to expect. During the first few weeks of the Coronavirus recession, most job losses were temporary in nature. The BLS reports that more than 7 million people were either laid off or placed on unpaid leave nationwide, but that 70 percent are expected to return to those same jobs when the lockdowns end.... We don’t have complete information for California yet, but the early indication is that approximately 71 percent of March layoffs are expected to be temporary. Read more here: https://californiaforecast.com/covid-19-economic-analysis/

Out today is our assessment of the economic damage and the outlook for the California economy during this pandemic. The unemployment rate (that we estimate for the latter part of March) surged and is now higher than during the Great Recession of 2008-2009. Five million jobs in California are at risk of being lost. So far, over one million unemployed workers have filed for benefits.... Tell me when we are allowed to go back to work and I’ll tell you what the forecast for 2020 looks like... Read more here: https://californiaforecast.com/monthly-newsletter/

We're tracking residential real estate weekly. Just as the spring selling season was about to begin, the real estate market was hit by the Coronavirus recession. What do the direct impacts of COVID-19 mean for the housing market? Analysis here: https://californiaforecast.com/covid-19-economic-analysis/

Our weekly unemployment tracker is now at record highs. The deterioration of the labor market has been much deeper than expected, and the effective unemployment rate is now 14.8 percent nationwide. A cumulative 10 million workers have filed for unemployment insurance benefits over the last two weeks. Claims are rising because of heavy layoffs, and because self-employed workers and independent contractors are now eligible to collect benefits.... Consequently, we estimate that there are probably more than 20 million people who are effectively unemployed. Full commentary here: https://californiaforecast.com/covid-19-economic-analysis/

California layoffs spiked in hotels, restaurants, and bars in March. Read the full analysis here: https://californiaforecast.com/covid-19-economic-analysis/

Our weekly unemployment tracker is now live. During the week of March 28, 2020, the US weekly unemployment rate increased to 9.4 percent and the California unemployment rate rose to 12.3 percent. The unemployment rate began to move sharply higher during the week of March 21st, which was the first full week after the National Emergency was declared and restaurants, bars, and other gathering places were ordered to close.... Read more here: https://californiaforecast.com/covid-19-economic-analysis/

Amidst new policies enacted over the last two weeks, the impacts on the California economy are unprecedented, and the front line impact is on jobs. The potential for record numbers of layoffs is now present, and this would generate a staggering increase in the unemployment rate. Read our current analysis here: https://californiaforecast.com/covid-19-economic-analysis/... We are anxiously awaiting what type of stimulus package Congress will pass and will provide an updated commentary when more information is available.

Will COVID-19 cause a recession? The emergence of the corona virus has been swift and substantial, with the number of global cases surpassing 100,000. The high profile reporting on the virus has created a hysteria in the world’s population.... This is a perfect prescription for a recession: a sudden and unexpected chaotic event that produces a massive crisis of confidence. In our year long search for the ultimate cause of the long awaited recession, could this be the catalyst for the event? Find out in our March newsletter: https://californiaforecast.com/march-2020/

Mark was recently interviewed about his views on the economy in 2020. Watch the interview here: https://www.youtube.com/watch

No one is concerned about our most prominent economic problems right now. Are we worried about the stock market? The national debt? The next recession? Not by a long shot. Research shows we're more preoccupied with "the government" and "Instagram" than the economy.... But stay tuned because conditions can turn on a dime... Read more in our February Newsletter: https://californiaforecast.com/february-2020/

Our New Development reports for California are now ready! Get info on the major construction projects across the state, including: -Single-Family Residential... -Multi-Family Residential -Office -Industrial -Warehousing and Logistics -Retail -Mixed Use Projects and Master Planned Communities These publications include projects in all stages of development, from conceptual to nearly complete, and document key project attributes: -Project Status -Plan Details -Builder Company Names -Photos, Maps, and Location Information -And More! Order here: https://bit.ly/2GI2cIt

The national debt - how serious a problem is it and do we need to address it now? The national debt has continued to be a significant subject of domestic controversy. Since 2017 when Trump entered the White House, the debt has increased by $2.7 trillion.... During the Obama administration, debt rose $8.2 trillion. During Bush, debt jumped $6.4 trillion, and Clinton: $1.4 trillion. Is a debt crisis coming? Read more in our January Newsletter: https://californiaforecast.com/january-2020/

It’s time to review 2019 briefly just before we move into next year. 11 months are in the books for 2019, and the twelfth looks reliably predictable to me. So predictable, in fact, that I can provide a pretty definitive summary of how the economy did and whether there is any momentum to lead us into 2020 with continued positive news... Read more in our December Newsletter: https://californiaforecast.com/december-2019/

Happiness is high but for how much longer? I’m looking at the sentiment and confidence indices of American consumers, and it is remarkable at how long a time we have been optimistic about the economy. Consumers like you and me are finding little not to like in the present environment of low unemployment, healthy job growth, and a stock market that continues to make record highs.... How long can we remain happy? For the next several months without much doubt. But expect noticeable weakening in sentiment by the summer, and this will manifest in slower sales at Target or the Toyota dealership in your neighborhood. So plan accordingly. Read more in our November Newsletter: https://californiaforecast.com/november-2019/

We need you in construction. October is the month for stock market corrections, Octoberfest, Halloween parties, and for the last two years, it’s been the month of natural disasters. I’m referring to the October 2017 fires in Northern California, and hurricanes Irma and Harvey a month earlier. Last year the ashes were just cooling from the Carr fire when the Camp fire began in early November.... An estimated 23,992 homes were destroyed by the fires of 2017 and 2018, and we expect that most will be replaced. The rebuilding efforts together with the development booms in the major metro areas of the state have resulted in a fully employed construction workforce, and construction wages are rising fast. The average annual earnings for a California construction worker now exceed $70,000. If you can do construction, you can get a job just about anywhere in California. Even if you know nothing, you will get hired and trained. So if you’re willing to pick up a hammer, we need you now... Read more in our October Newsletter: https://californiaforecast.com/october-2019/

How should you prepare for 2020? Start with a Bob Dylan quote from 55 years ago: These times they are a’changin. The stock market is acting like an amusement park ride. The Dow dropped 800 points on August 14 and 623 points on August 23. But between those declines it rebounded sharply. TD Securities said its recession model is predicting a 55 percent chance of recession within 12 months.... I don’t yet see that myself, but conditions can change quickly... Read more in our September: Newsletter: https://californiaforecast.com/september-2019/

We're now in the longest expansion in U.S. history. On July 1, the U.S. economy quietly celebrated the longest consecutive spell of economic growth on record: 10 years and one month. The economy has grown by only 2 percent per year during this expansion, but so what? What’s to criticize?... Wages are rising faster than the rate of inflation. Inflation is historically low. Interest rates are historically low. Your car payment is low. If you financed a home purchase between 2010 and 2015, your house payment is low. If you already owned a home before that, your payments are probably even lower... Read more in our July Newsletter: https://californiaforecast.com/july-2019/

Population Growth Slowest in Recorded History That was the headline in the LA Times on May 1, 2019. Why is population growth slowing down? -High home prices due to the dearth of housing... -High taxes, and -Insane traffic, like at the 101 and 405, or on the 101 transition to Interstate 80 in San Francisco, or on the 880 anywhere Is this good or bad? Find out in our May Newsletter: https://californiaforecast.com/may-2019/

What is the outlook for housing in 2019? With the first quarter of 2019 now in the books, we have a clearer picture of how the housing market is likely to move this year. Existing home sales are forecast to remain at muted levels in 2019 and 2020. The fall-out that occurred in 2018 with sales falling 5 percent in California is unlikely to be reversed this year.... While a lack of inventory has been a constraining factor on home sales in recent years, this year inventory is rising, just about everywhere you look. Consequently, with more supply and a reticence to buy, look for softening prices in 2019. Our base forecast for home price appreciation does moderate however, and the alternative forecast turns negative if sales fall off further... Read more in our April Newsletter: https://californiaforecast.com/april-2019/

Inverted yield spreads and recessions. How do they fit together? An inverted yield curve is an interest rate environment in which long-term debt has lower yield than short-term debt of the same credit quality. It occurs when the 10 year U.S. treasury bond yield less the 3 month U.S. treasury bill yield turns negative. Is the yield curve actually close to signaling a recession?... Yes the spread is on a path heading straight for an inversion. We are near to that situation but we’re not there yet. If it remains on its current rate of trajectory, an inversion would occur this summer... Read more in our March Newsletter: https://californiaforecast.com/march-2019/

Cracks in the Economy and the Next Recession -Labor markets are full and still hungry for more workers (positive) -The IMF warns of a slowing in global growth (negative) -The Fed has paused and may be more flexible (positive)... -The tariff issue resolving quickly (positive) is still just a hope (negative) -The stock market is rallying again, on earnings (positive) -The government is now open again (positive) -Consumer sentiment plunged in January (negative) -Industrial production rose in Dec. for the 7th straight month (positive) -The yield curve is narrowing (negative) Read more in our February Newsletter: https://californiaforecast.com/february-2019/

What should you expect from the economy in 2019? Nothing much fazed the economy in 2018. The wild oscillations in the stock market, the trade war with China, the California fires, or the midterm elections. The economy remained strong all year long. Employment opportunities won’t be the same this year as last, not because of weaker demand for workers from employers, but because employers won’t be able to find workers to fill the increasing number of unfilled positions.... That means a slower year for output and the quarterly GDP reports, unless workers become a lot more productive... Read more in our January Newsletter: https://californiaforecast.com/january-2019/

Though now legal, cannabis sales (and taxes) are not yet meeting expectations in California. California began issuing cannabis permits on January 1, 2018, and Governor Brown predicted annual tax revenues at $643 million for the first year of legal cannabis production and retail sales. However, based on the current rate of tax receipts, the governor's estimates were far too high. Actual tax receipts could fall short by almost 50%.... Why? Because the cannabis regulatory process is expensive and onerous, and growers are staying underground. To date, only 3% of California growers have legalized, with the rest staying on the black market. Read more in our December Newsletter: https://californiaforecast.com/december-2018/

Here's what you should know about the longest expansion in modern U.S. history: -The expansion will become the longest on record in July 2019 -GDP growth has accelerated this year, akin to a breakout -There are not enough unemployed people to fill all open jobs... -Wages and salaries appear to be rising slowly -In reality, wages are rising almost as fast as the late 1990s -Interest rates are doing exactly what the market expects -Home prices continue to soar Read more in our November newsletter: https://californiaforecast.com/november-2018/

Are wildfires in California the new normal? It’s been a year since the worst fires in the modern history of California swept through Northern California creating a path of unprecedented destruction. The newsletter this month presents the extent of the damage from these events and raises the possibility that this kind of carnage might be the new norm in California going forward.... We need to seriously reconsider the building of more homes and other structures in fire prone areas. As it is, we are not building enough housing so adding further restrictions on location will be highly controversial. But it may be necessary in view of the increased risk of fire, the soaring cost of fighting fires, and the structural damage that results from their number and intensity. Read more in our October Newsletter: https://californiaforecast.com/october-2018/

Subtle changes are underway. It’s fall. School started again. My kids began their junior year in high school. Though they didn’t say anything about it and would certainly never admit it, I think they were glad at the change in their daily schedules that school brings.... And what about the economy? Will the new round of tariffs have subtle effects? What about interest rates and Fed policy? Will the economy change in subtle ways like the seasons, or is something more transformative underway? Read more in our September Newsletter: https://californiaforecast.com/september-2018/

I am often asked about shortages in California, and there are three that come up frequently: -Workers -Housing, and -Water... In fact, we have escalated the housing shortage into a housing crisis. Soon, and we might already be there, we will have a worker" crisis. Despite the end to the drought in Northern California, we still refer to the issue of water as the water shortage here in Southern California. What can we do about shortages? To start, we can produce more of the goods in question... Read more in our August Newsletter: http://californiaforecast.com/august-2018/