Written by The Business Journal Staff
Projections from the Center for Business and Policy Research at the University of the Pacific expect that the state economy should maintain strong growth through 2019 despite an uncertain policy environment and financial market volatility.
In the Fresno metropolitan area, the report expects that trend to translate to a drop in the unemployment rate. The rate for 2018 so far stands at 7.3 percent, down from 8.6 percent in 2017. The report anticipates that rate to bottom out at 7 percent in 2019 and continue that way into 2020.
Construction and mining sectors will lead non-farm employment growth at 4.8 percent in the industry followed by manufacturing growing at 3.4 percent and professional and business services at 3.2 percent.
Average wages in the Fresno area are expected to increase by 3 percent to $54,117 in 2019. By 2021, average wages are expected to be $58,242.
The report is also anticipating 1 percent population growth annually and a 1 percent growth in the labor force.
Across the state, unemployment is at 4.2 percent this year and should drop to 3.7 percent next year before increasing slightly to 3.8 percent in 2020.
Nonfarm payroll jobs will grow 1.7 percent over the next 12 months and will drop below 2 percent growth for the first time since 2011 and payroll growth will drop below 1 percent by late 2020, which is expected for an economy at full employment after a long expansion.
In the farming community, employment data from 2017 show a .5 percent decrease between 2017 and 2016, breaking a seven-year streak of increasing employment. The decline was entirely due to a sharp 4 percent year-over-year drop between January and February of 2017, according to the report.
“Since these two negative months correspond to President Trump’s inauguration, increased anxiety surrounding immigration policy may have had an impact,” the report reads.
All of the metro areas of Northern California covered in the forecast should experience a job growth rate of 2 percent or more in 2018, led by Merced, San Jose and Stockton, all of which are on track for economic growth of about 3 percent.
California’s rate of economic growth is forecast at 3.4 percent through 2019, and as the risk of economic recession grows, will drop to 2.5 percent in 2020, and 1.9 percent in 2021.
The report cites a “Trump bump” over the first two years of President Trump’s term driven by tax cuts and deficit spending. The report goes onto to anticipate an overall negative effect due in large part to the weakening of Affordable Care Act policies, restrictive immigration, trade wars and reduced government spending.
“This policy environment is partially responsible for our strong growth forecast for California in 2018 and 2019, followed by a slow down to below 2 percent growth in gross state product by 2021 with a rising risk of recession,” the report’s author wrote.
After a period of rapid growth, health services has become the largest employment sector in the state and is projected to add more than 45,000 positions over the next 12 months.
Tourism and a shift in consumer spending from retail to restaurants has spurred rapid growth in the leisure and hospitality sector, however, forecasts predict that will fall below 20,000 new jobs this year and experience even slower job growth in 2020 as rising labor costs and low labor availability drives change in the hospitality sector.
Construction activity continues to grow with 40,000 to 50,000 new jobs anticipated in each of the next three years and wages in the sector have been among the fastest growing of all sectors as employers compete for a limited supply of skilled workers.