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Research Center Releases Economic Growth Forecast

California’s economic growth has slowed from the nation-leading levels of recent years, but continues to expand at a steady rate, according to the latest projection from the Center for Business and Policy Research at the University of the Pacific in Stockton. The forecast projects real gross state product to sustain its expansion at a 2.5 percent to 3.0 percent rate and payrolls to grow at about 1.5 percent rate for the next two years. The unemployment rate is about 5 percent and is expected to remain at or slightly below this level over the next few years. Faster growth in California is constrained by the growing scarcity of skilled workers, and extreme housing costs that prevent faster growth to population and the labor force.

In the regional outlook, these constraints of labor and housing have led to a long anticipated growth slowdown in the Bay Area. However, the Bay Area economy remains strong and forecasters do not project any additional slowdown.

The San Francisco, San Jose and Oakland metro areas are all projected to maintain current pace near 2 percent job growth in 2018. The economic outlook for the Central Valley has improved slightly over the past few months, in part because efforts to repeal the Affordable Care Act have failed and construction activity continues to increase. The North San Joaquin Valley and Sacramento are forecast to exceed 2 percent growth in payrolls next year. The full forecast includes detailed projections through 2021 for all of these areas, and discussion of the effects of affordable housing legislation, the future of the financially troubled Delta tunnels proposal, and the prospect of attracting Amazon HQ2 to Northern California.

The Center for Business and Policy Research at the University of the Pacific was founded in 2004 and was known as the Business Forecasting Center until March 2015. The Center is a joint program of the Eberhardt School of Business and the McGeorge School of Law programs in public policy and has offices at the Sacramento and Stockton campuses. The Center produces economic forecasts of California and eight metropolitan areas in Northern and Central California, in depth studies of regional economic and policy issues, and conducts custom studies for public and private sector clients. For more information, visit

Highlights of the October 2017 California Forecast include:

• Over the next 12 months, real gross state product is forecast to grow 2.9 percent and the risk of recession is low.

• The California unemployment rate is about 5 percent and is forecast to stabilize just below 5 percent for the next three years. The labor force and number employed are projected to grow at about a 1 percent annual rate through 2020.

• Nonfarm payroll jobs will grow 1.5 percent over the next 12 months, about half the pace of the previous four years when job growth was between 2.5 percent and 3 percent. Payroll growth will decline further to 1 percent by 2020, which is to be expected for an economy near full employment.

• Health Services has become the largest employment sector in the state, and is projected to add about 40,000 positions over the next 12 months, less than the 65,000 jobs added in recent years.

• Professional Scientific & Technical Services is a high-paying sector that has fueled the recovery. Growth in this sector will slow to 22,000 jobs over the next year compared to over 50,000 in some recent years as Silicon Valley growth cools.

• Growing tourism and a gradual shift in consumer spending from retail to restaurants has fueled rapid growth in Leisure and Hospitality sector. However, this sector’s growth is slowing to 30,000 new jobs over the next 12 months, and will drop below 20,000 new jobs by 2020 as higher minimum wages lead to slower hiring.

• State and local government employment will be one of the slowest growing sectors, projected at about 0.5 percent job growth over the next several years as state and local governments grapple with rising pension costs.

• Construction activity continues to grow with about 35,000 new jobs anticipated in each of the next three years, about a 4 percent annual growth rate.

• Single family housing starts are picking up, growing from 50,000 units in 2016 to a projected 60,000 in 2017 and 78,000 by 2020. Multi-family production is projected to exceed 50,000 units in 2017, and reach 60,000 units by 2021. Despite this improvement, housing production will be insufficient to relieve the state’s growing housing shortage.


• California’s population growth rate has declined to 0.7 percent and is projected to remain below 1 percent due to lower birth rates, immigration, and housing costs. The state will add about 280,000 residents in each of the next few years, notably fewer than in the past.