Latest UCLA Anderson forecast says economic recovery will take more than two years
The latest UCLA Anderson forecast finds that California’s full recovery from the COVID-induced economic downturn will take more than two years. The quarterly forecast, released this week, offers a “better-than-expected” outlook for the United States than was originally predicted in its June forecast.
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Under an assumption that “pandemic-induced shutdowns will dissipate in 2021,” the economists predict California’s economic outlook will improve substantially in the third quarter of 2020. However, they also predict that a full recovery won’t take place until after the end of 2022.
One example that reflects this trend is the outlook for payroll employment. Payroll employment is expected to reach 16 million by the end of 2020, after having dropped to 15.2 million in the second quarter of 2020. By the end of 2022, payroll employment is expected to reach 17.2 million, but this is still below the approximately 17.5 million jobs at the start of 2020.
The state unemployment rate also won’t be back to pre-pandemic levels by the end of 2022. The unemployment rate was about 3.9% in February but quickly jumped to 15.9% in the second quarter of 2020. The average rate for the year is expected to be 10.8%, but is projected to fall to 8.6% in 2021 and 6.6% in 2022.
The forecast also predicts recovery will vary based on industry.
“While we do project substantial employment gains in the third quarter of this year for most industries, some will continue to struggle more than others,” writes economist Leila Bengali.
Bengali says the leisure and hospitality industry will continue to struggle, while the housing market is expected to make a quick recovery.
“The housing market is an area where we project particular strength and a quick recovery to pre-recession levels, with residential building permits almost back to their 2020 first quarter level by year’s end and reaching just about 130,000 units by the end of 2022,” wrote Bengali.
In general, the report predicts California will recover similarly to the United States as a whole. But some areas will be weaker, such as leisure and hospitality, and other areas, such as professional and business services, will be stronger.
California’s unemployment rate is expected to remain higher than the US rate, as has historically been the case.