Business & Real Estate

Forecast: Economy to strengthen in California, Sacramento

California and Sacramento’s economy will continue to improve this year despite the drought and the recent slowdown in the U.S. economy, according to the latest quarterly forecast from the University of the Pacific.

The forecast from UOP’s Center for Business and Policy Research, released Friday, said job growth will remain healthy in Sacramento and statewide throughout 2015. California’s unemployment rate, currently at 6.3 percent, will fall below 6 percent by year’s end. Sacramento will finally recoup all of its recession job losses this fall, becoming the last of the 10 largest metro areas to reach that threshold.

Economist Jeff Michael, director of the UOP center, said California will feel only mild effects from the drought and the disappointing economic growth nationally. The drought could take “a few billion dollars” out of the state’s economy, he said.

“It can be a severe issue for individuals and communities,” Michael said in an interview. “Overall, it’s not the kind of crisis that derails economic growth. It’s a bit of a headwinds.”

He noted that farm employment rose last year despite the fallowing of an estimated 500,000 acres of land due to water shortages. Experts say farmers have coped with the drought by shifting resources to higher-value crops, many of which are more labor intensive. With forecasts calling for even more fallowing this year, Michael said it’s likely agricultural employment will decline this year.

“We expect agricultural impacts will be deeper than last year,” he said.

Although U.S. economic output numbers have been disappointing this year, Michael said they haven’t translated into a slowdown at the state level. He said the phenomenal growth in the technology sector continues to lift much of the state’s economy.

“While there are still some lingering problems with construction and real estate, the state’s economy has almost fully recovered from the Great Recession,” he wrote.