All Posts Tagged: Federal Reserve

California Economic Outlook Report – December 2020

Scott Anderson
Chief Economist

EXECUTIVE SUMMARY

California’s labor market recovery is lagging the nation as job losses in pandemic impacted industries remain high and new business restrictions and stay at home orders begin to bite.

After six consecutive months of job increases through October, employment in California is still 8.4% or 1.47 million jobs below the February peak.

California employment is forecast to decrease 7.1% in 2020 and rebound 1.5% in 2021.

California’s economic downturn would have been much worse without the unprecedented fiscal support from federal and state governments and aggressive monetary action from the Federal Reserve that helped loosen financial conditions and keep California consumers and businesses solvent despite unprecedented sales declines and job loss.

We assume additional substantial fiscal support from the Federal government will be needed and delivered by Congress in late 2020 and/or early 2021 to achieve this modest job growth across the state of California in 2021.

California’s unemployment rate declined to 9.3% in October from 16.4% in May, but remains the fourth highest among states in the nation. Further declines in California’s unemployment rate in 2021 will come much slower than they did this year. The state’s unemployment rate is expected to remain elevated and average 10.2% in 2020 and 8.9% next year, well above the U.S. unemployment rate of 8.1% in 2020 and 6.6% in 2021.

Solid housing demand, record low mortgage rates, and slim new and existing home inventories have turbo charged California’s housing market recovery since the spring decline with existing home sales increasing 19.9% from a year earlier in October. Housing starts are forecast to increase a solid 12.2% in 2021 on firming demand as the pandemic wanes and job growth returns.

California home prices are forecast to rise a robust 10.4% this year – primarily due to a shortage of homes for sale – and moderate to 6.1% in 2021 and 4.0% in 2020 as homebuilders respond to stronger demand by putting up more homes to alleviate the inventory shortfall.

To learn more, check out the California Economic Outlook December 2020.

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Deteriorating Fundamentals vs. Rising Expectations

Scott Anderson
Chief Economist

Over the near-term, U.S. economic growth fundamentals look set to deteriorate. Yet U.S. stock prices remain close to record highs and long-term Treasury yields have moved up 10 to 15 basis points in the last week alone on prospects for sizable fiscal stimulus and a new Democratic administration. The markets are clearly trying to look past near-term signs of trouble, while focusing on a brighter 2021. 

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Fed Green Lights Higher Inflation and Rates Follow

Scott Anderson
Chief Economist

After nearly two years of study, the Federal Reserve finally updated its framework statement on its long-run goals and monetary policy strategy first adopted in 2012.

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Financial Stability Concerns On The Rise

Scott Anderson
Chief Economist

The most sobering section of the July Federal Open Market Committee Minutes, for me, was the description and discussion on financial system stability.

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Personal Spending Rebound Falls Short of Forecasts

Scott Anderson
Chief Economist

What is the old phrase, you can lead a horse to water but you can’t make him drink? Using that analogy, the Federal Government and Federal Reserve have been pumping an unprecedented amount of water into our economy, trying to entice consumers back into stores and restaurants, and resume their old patterns of spending once businesses are able to reopen. That reopening started in nearly all 50 states in May and we got an important update on how it’s all going this morning with the release of the May Personal Income and Spending report from the Bureau of Economic Analysis.

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