A study shows that California's economy will experience a “below average” year in 2024

California's economy will grow slower than the rest of the country this year, according to a new forecast from UCLA Anderson.

With national economic growth not expected to accelerate until after next month's election, “a full year of subpar growth is forecast in California,” said Jerry Nickelsburg, director of the UCLA Anderson Forecast.

Growth in 2025 and 2026 is expected to be faster than the country's, Nickelsburg said, “but not by much.”

The reasons for the bleak outlook are similar to those that California has faced for some time: employment in advanced technologies and rural areas has lagged, and housing construction continues to struggle.

The state's unemployment rate has been among the highest in the United States all year, and the trends that have driven that rate higher are expected to continue throughout the rest of 2024. The state's economy grew 2.8% annually in the second quarter of this year, slightly less than the United States

Silicon Valley, San Francisco and San Diego saw job growth slower than the rest of the country, largely due to a slowdown in the technology sector.

Also lagging behind is the San Joaquin Valley economy, hit hard for the second straight year by what the report calls “unusual winter weather.”

“The employment situation leads to a relatively weak forecast for California for 2024 and a slow return to the national unemployment rate,” the forecast says.

California's unemployment rate was 5.3% in August, according to the most recent data available. This puts the state, along with Illinois, at the second highest rate in the country. Nevada ranked first at 5.5%.

The UCLA forecast expected California's rate to average 5.3% in the first three months of next year, then fall to 4.9% in the spring and 4.4% in the summer. The rate is expected to remain around this level through 2025 and 2026.

Statewide, the rate was 4.2% in August. The Federal Bureau of Labor Statistics will announce the September quota on Friday.

UCLA posted a national average of 4.4% in the first six months of next year, followed by 4.3% over the summer.

There was a more positive forecast for housing construction in California. The forecast said the market “could well be on the cusp of a trend toward normalization.”

Mortgage rates are at their lowest level in two years. The Federal Reserve is expected to further cut its key interest rate as this has a strong impact on other interest rate trends.

However, the forecast also came with a warning: “With sales of existing homes falling, builders should respond to new developments, but a very wet winter has resulted in only a very small increase in building permits.”

Nevertheless, the report saw better times ahead. Home sales are likely to rise again as interest rates fall, it said, which will also strengthen the health of the financial sector.

Manufacturing of long-lasting or larger items such as computers is likely to be “turned around as new factories are currently opening (and demand is increasing as the economy grows over the next two years”).

Also looking for: artificial intelligence development and commercial aerospace production.