Walters: Is a Recession on Our Horizon?
dan_walters
By Dan Walters, CalMatters Commentary
Published 5 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

FresYes Fest Is Saturday: This Immigrant Is Living the American Dream With Xtreme Shawarma

DON'T MISS

Records Show That Valley Children’s Leader Suntrapak’s Pay Exceeds $5 Million

DON'T MISS

3 Valley Schools Honored by State as Model Community Day Schools

DON'T MISS

Will FUSD Trustees Look First Only at Internal Candidates in Superintendent Search?

DON'T MISS

Fresno Bank Sued. It Allegedly Helped Bitwise Commit Fraud.

DON'T MISS

How California’s Prized Solution for Methane Gas Is Backfiring on Farmers

DON'T MISS

Bredefeld, Chavez Win Attorneys Fees from Fresno County. Court Gives Chavez Blvd. a Green Light.

DON'T MISS

Trump’s Lawyers Say It Is Impossible for Him to Post Bond Covering $454 Million Civil Fraud Judgment

DON'T MISS

Special Congressional Election Tuesday. How Many Have Voted Already?

DON'T MISS

Brothers Say They Found Amelia Earhart’s Plane, Will Donate It to Smithsonian

No data was found

The 49ers Have Been Docked a 2025 Fifth-Round Draft Pick for an Accounting Error

9 hours ago

Fresno Bank Sued. It Allegedly Helped Bitwise Commit Fraud.

Bitwise /

9 hours ago

How California’s Prized Solution for Methane Gas Is Backfiring on Farmers

Environment /

12 hours ago

Supreme Court Seems Favorable to Biden Administration Over Efforts to Combat Social Media Posts

12 hours ago

Putin Extends Rule in Preordained Russian Election After Harshest Crackdown Since Soviet Era

13 hours ago

Ohtani to Begin Throwing Program Soon. Roberts Hints Dodgers Star Might Play in the Field

13 hours ago

Trump: Some Migrants Are ‘Not People’, There’ll Be a ‘Bloodbath’ if I Lose

13 hours ago

Tech Lawyer and Philanthropist Nicole Shanahan Rumored as RFK Jr.’s VP Pick

News /

13 hours ago

March Madness is Here. UConn, Purdue, Houston and North Carolina Get Top Seeding in NCAA Tournament

14 hours ago

Crafts Retailer Joann Files for Chapter 11 Bankruptcy as Consumers Cut Back on Pandemic-Era Hobbies

14 hours ago

Records Show That Valley Children’s Leader Suntrapak’s Pay Exceeds $5 Million

■Valley Children’s paid CEO Todd Suntrapak $5.2 million in 2021. The hospital also gave him a $5 million forgivable home loan. ■The Va...
Healthcare /

8 hours ago

3 days ago

Realtor Association Settles Lawsuit on Commission Rules. Fresno Broker Fears the End of Market Transparency

3 days ago

Prosecutor Leaves Georgia Election Case Against Trump After Relationship With District Attorney

4 days ago

Rory McIlroy’s 65: 10 Birdies, 2 Tee Shots in the Water, 1 Testy Dispute

4 days ago

Aaron Donald Announces His Retirement After a Standout 10-Year Career With the Rams

4 days ago

New Book Explores the Myths, Truths and Legacy of the Macho Man

4 days ago

Baseball Superstar Ohtani and His Wife Arrive in South Korea for Dodgers-Padres MLB Opener

4 days ago

India’s New Citizenship Law Excludes Muslims. Here’s What to Know

4 days ago

US, G-7 Allies Warn Iran to Back Off Deal to Provide Russia Ballistic Missiles or Face New Sanctions

Photo of San Francisco 49ers' Arik Armstead

4 days ago

Former 49ers DT Arik Armstead Agrees to a 3-Year, $51 Million Deal with the Jaguars, AP Source Says

4 days ago

Supreme Court Rules Public Officials Can Sometimes Be Sued for Blocking Critics on Social Media

Search