Recession due to coronavirus could hit California harder than rest of U.S.
The U.S. economy has entered its first recession in 11 years, and it’s likely to be slightly more severe in California than the rest of the nation, a new forecast from the UCLA Anderson School of Management said Monday.
By the first quarter of 2021, California is expected to lose more than 280,000 payroll jobs, the report said. More than one-third of those jobs would be in leisure and hospitality and transportation and warehousing.
“For California, a state with a larger proportion of economic activity in tourism and trans-Pacific transportation, the economic downturn will be slightly more severe,” the report said.
It predicted employment would drop by 0.7% in 2020, with the second and third quarters contracting at an annual rate of 2.6%.
The unemployment rate should go up to 6.3% by the end of this year and is expected to continue to increase into 2021 with an average next year of 6.6%.
The new forecast, though, had a footnote: “If the pandemic is much worse than assumed, this forecast will be too optimistic. If the pandemic abates quickly because of the extraordinary measures being put into place to address it, an outcome that the medical community thinks unlikely but possible, then the forecast is too pessimistic and economic growth in the third and fourth quarters of the year will be higher.”
The forecast revised an outlook released just last week. It said the recession could continue through the end of September.
“After a solid start to 2020, the escalating impacts of the coronavirus pandemic in March have reduced the first-quarter 2020 forecast of GDP growth to 0.4%,” the report said.
GDP is the Gross Domestic Product, the value of the nation’s goods and services. The forecast predicts the GDP second quarter decline at 6.5% and the third quarter drop at 1.9%. Two quarters of declining GDP is usually considered a recession.
The forecast does predict more normal activity in the fourth quarter of this year, with GDP growth of 4%.
“For the full 2020 year, it is expected that GDP will have declined by 0.4%,” the report said. “In 2021, with the abatement of governmental pandemic expenditures and the continued contraction of residential and commercial construction, the economy is forecast to grow at only 1.5%. The full recovery and return to trend is now expected in 2022.”
This story was originally published March 16, 2020 at 11:31 AM.
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