A new economic forecast for the U.S., California, and Inland Southern California says the nation’s economy not only doesn’t look fragile, it looks increasingly able to weather whatever storm is unleashed by the ongoing slowdown in China.
The forecast is the first to come out of the newly formed Center for Economic Forecasting and Development at the University of California, Riverside’s School of Business Administration and is being released in conjunction with the 6th Annual Inland Southern California Economic Forecast Conference.
The new outlook says the U.S. economy could end up growing by 3 percent this year, the best showing since the recovery began.
“While there has been a lot of handwringing about China and the recent machinations in the financial markets, a slew of new economic data has been coming out that points to a healthier U.S. economy,” said Christopher Thornberg, director of the new center and one of the forecast’s lead authors.
Among other things, this includes an acceleration in the pace of construction and business investment.
According to the analysis, some of the top positive trends driving the nation’s economy at the moment include a rebounding housing market, a recovering Europe, and commodity prices (which have been low since the collapse in oil prices last year) that are no longer acting as a drag on the economy. Concerning trends include rising income inequality, rules that have limited mortgage credit and an increase in unexplained financial market volatility.
One of the brightest spots in the economy is California. With a 3.1 percent expansion through the mid-point of 2015, the state’s labor market is growing 50 percent faster than the nation’s. And there has been an increase in the quality of these jobs: Four high-wage industries accounted for one-quarter of all jobs created in California in the past year. Moreover, this has finally started to affect wages.
“For quite a while there has been a distinct lack of wage growth despite the improving economy,” said Jordan Levine, director of research at the new center and one of the forecast’s lead authors. “Today, we are finally starting to witness a broad-based improvement in wages; this is no doubt being driven by high-wage sectors but is still spreading to other workers.”
The average annual wage for all workers was up 3.4 percent last year in California compared to 3.1 percent in the nation. Still, one of the negative statewide trends the forecast also identifies is that while there has been an increase in both high- and low-wage jobs, many middle income industries, including manufacturing, have yet to exhibit any significant growth and remain well below pre-recession levels.
In Inland Southern California, the forecast says there is little to hinder the region’s growth with a majority of the area’s key economic indicators on an upward trajectory. The inland region now has one of the fastest growing labor markets in California, its home prices and home sales are on the rise and its population growth is outpacing some coastal areas and the state overall.
Yunzeng Wang, dean of the School of Business Administration at UC Riverside, says the expansion of the region’s economic reach and impact make the establishment of the new center all the more critical.
“The place we call home packs a very significant economic punch not only here, but across the state and beyond,” Wang said. “We expect the quantitative research and collaborative discussions that come out of the Center to not only reveal new insights about the direction of the local economy but to uncover new opportunities and areas of innovation that allow us to continue contributing to growth here and beyond our borders.”
Thornberg and Levine are also founding partner and director of research, respectively, at Beacon Economics. Beacon has partnered with UC Riverside the past several years on an annual forecast and event. This year, and on an ongoing basis in the future, the conference and forecast will be presented by the center.
Source: UC Riverside