Please ensure Javascript is enabled for purposes of website accessibility
Walters: Is a Recession on Our Horizon?
dan_walters
By Dan Walters, CalMatters Commentary
Published 6 years ago on
August 18, 2019

Share

We live in volatile economic times, with global markets reacting moment by moment to the latest bits of data and the utterances of central bankers and politicians — even the tweets from the White House.
California’s economy is much too big — the fifth largest in the world, we are constantly reminded — to avoid that volatility. Agriculture and the state’s high technology sector, for instance, are directly affected by trade conflicts between the U.S. and China.


Dan Walters
CALmatters

Opinion
California, meanwhile, generates its own economic x-factors, such as shortages of housing and workers, and wildfires’ impacts on electric utilities’ financial stability.
Volatility makes forecasting California’s diverse economy particularly difficult, leaving an overarching question: Will our nearly decade-long economic expansion continue into the 2020s or is a severe recession inevitable?
The cautious tones of recent economic surveys attest to the syndrome.

California’s Historically Low Unemployment Rate

The Legislative Analyst’s Office (LAO) has created what it calls the “State Fiscal Health Index” – a basket of specific economic indicators – in a valiant effort to chart what’s happening more or less in real time.
“Knowing when the state’s next budget slowdown will happen is impossible,” the LAO says in its most recent report. “Many economic factors outside the state’s control influence state revenues. Despite this, certain data points can help us understand whether shifting economic conditions are likely to lead to growth or declines in state revenues in the coming months.”
Although the index was “near historic highs in June,” the LAO said, “it has declined for three straight months. Declines of this magnitude have not been observed since the last recession.”
“While a three-month trend is not enough to draw firm conclusions,” the report continued, “each additional month of decline in index increases the risk that an economic slowdown is on the horizon.”
A similar appraisal comes from UCLA’s Anderson Forecast, which has created its own month-to-month indicator in hopes of tracking real-time effects of volatility on California, saying it “will be as current as the most current economic data.”
At the moment, Anderson sees California’s historically low unemployment rate, generally a positive factor, as a potential negative because employers cannot create new jobs if there’s no one there to fill them.
“As predicted, the California economy is slowing down,” the latest Anderson report says. “The state is, quite simply, running out of people to be employed.”

Doing Something About Housing Is Absolutely Vital

In decades past, when California’s job market has been strong, the state has attracted workers from other states, but there’s little in-migration of workers now because potential recruits are turned off by sky-high housing costs.

“California defied naysayers by putting in another solid economic performance in 2018, but has gotten off to a slower start in 2019. This is not indicative of a pending recession, but rather the result of a slowdown in labor force growth and rising housing costs, both of which require time to solve.” – Beacon Economics
Beacon Economics has a more positive outlook than the LAO or Anderson, but expresses similar concerns about labor and housing.
“California defied naysayers by putting in another solid economic performance in 2018, but has gotten off to a slower start in 2019,” Beacon says. “This is not indicative of a pending recession, but rather the result of a slowdown in labor force growth and rising housing costs, both of which require time to solve.”
“California continues to exhibit a dynamism that is found in just a handful of other places around the country and the world,” Beacon continues, with a final caveat. “One can only imagine how much growth might be unleashed if the state can successfully address its housing challenges. Solutions must be both economically and politically viable, but will take time to achieve.”
With the Legislature now in the final month of its 2019 session, lawmakers should grasp that doing something about housing is absolutely vital if California is to weather these volatile economic times.
CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.
[activecampaign form=31]

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Trump Compares Russia and Ukraine to Children Fighting

DON'T MISS

Trump Administration Imposes Sanctions on Four ICC Judges in Unprecedented Move

DON'T MISS

SpaceX Will Decommission Dragon Spacecraft, Musk Says as Feud With Trump Escalates

DON'T MISS

Erika Sandoval Gets Life Sentence in Notorious Tulare County Murder

DON'T MISS

Israeli Military Strikes Beirut’s Southern Suburbs

DON'T MISS

We Are Being Governed by the Trump Organization Inc.

DON'T MISS

Wondrous Webster Has the Makings of a Wonderful Family Member

DON'T MISS

Trump Threatens Musk’s Government Deals as Feud Explodes Over Tax-Cut Bill

DON'T MISS

Fresno Police Want Your Tips to Solve Taylor Washington Homicide

DON'T MISS

Derek Carr Explains Mysterious Retirement. He Didn’t Want to ‘Just Take the Saints’ Money’

UP NEXT

Trump Administration Imposes Sanctions on Four ICC Judges in Unprecedented Move

UP NEXT

SpaceX Will Decommission Dragon Spacecraft, Musk Says as Feud With Trump Escalates

UP NEXT

Erika Sandoval Gets Life Sentence in Notorious Tulare County Murder

UP NEXT

Israeli Military Strikes Beirut’s Southern Suburbs

UP NEXT

We Are Being Governed by the Trump Organization Inc.

UP NEXT

Wondrous Webster Has the Makings of a Wonderful Family Member

UP NEXT

Trump Threatens Musk’s Government Deals as Feud Explodes Over Tax-Cut Bill

UP NEXT

Fresno Police Want Your Tips to Solve Taylor Washington Homicide

UP NEXT

Derek Carr Explains Mysterious Retirement. He Didn’t Want to ‘Just Take the Saints’ Money’

UP NEXT

What Do Valley Leaders Say About Trump’s Threat to Yank High-Speed Rail Funding?

Erika Sandoval Gets Life Sentence in Notorious Tulare County Murder

21 minutes ago

Israeli Military Strikes Beirut’s Southern Suburbs

1 hour ago

We Are Being Governed by the Trump Organization Inc.

1 hour ago

Wondrous Webster Has the Makings of a Wonderful Family Member

1 hour ago

Trump Threatens Musk’s Government Deals as Feud Explodes Over Tax-Cut Bill

1 hour ago

Fresno Police Want Your Tips to Solve Taylor Washington Homicide

3 hours ago

Derek Carr Explains Mysterious Retirement. He Didn’t Want to ‘Just Take the Saints’ Money’

4 hours ago

What Do Valley Leaders Say About Trump’s Threat to Yank High-Speed Rail Funding?

4 hours ago

Were Cuts in Rooftop Solar Payments Legal? CA Supreme Court Hears Arguments

5 hours ago

Fresno Rainbow Pride Marks 35th Year with Saturday Parade and Festival

5 hours ago

Trump Compares Russia and Ukraine to Children Fighting

As Germany’s chancellor, Friedrich Merz, sat beside him watching in silence, President Donald Trump compared Russia and Ukraine to two...

10 minutes ago

10 minutes ago

Trump Compares Russia and Ukraine to Children Fighting

17 minutes ago

Trump Administration Imposes Sanctions on Four ICC Judges in Unprecedented Move

21 minutes ago

SpaceX Will Decommission Dragon Spacecraft, Musk Says as Feud With Trump Escalates

21 minutes ago

Erika Sandoval Gets Life Sentence in Notorious Tulare County Murder

1 hour ago

Israeli Military Strikes Beirut’s Southern Suburbs

1 hour ago

We Are Being Governed by the Trump Organization Inc.

Webster, GV Wire's Adoptable Pet of the Week, June 5, 2025
1 hour ago

Wondrous Webster Has the Makings of a Wonderful Family Member

1 hour ago

Trump Threatens Musk’s Government Deals as Feud Explodes Over Tax-Cut Bill

Help continue the work that gets you the news that matters most.

Search

Send this to a friend