California's Economic Growth to Outpace Nation Thanks to Tech Innovations, UCLA Forecasts

LOS ANGELES, CA - Fueled in part by technological advancements making business more productive, California's economy will grow at a faster pace than the rest of the United States over the next two years, and the state will continue to see steady gains in employment, according to a UCLA Anderson Forecast released today.

In his report on the California economy, Anderson Senior Economist Jerry Nickelsburg wrote that technology innovations aren't the entire basis for the state's recovery, but they represent a major part of it.

"The very rapid growth in Silicon Valley and San Francisco attest to this fact," he wrote. "The results presented here suggest that in the near term, the critical mass developed with California's research institutions will continue to provide the state with a disproportionate amount of innovation and therefore a faster growth in GDP than the average for the U.S.

"The fly in the ointment stems from the fact that innovation in productivity improvements is not like assembling aircraft. It comes in fits and starts and is inherently unpredictable," according to Nickelsburg's report. "Nevertheless, we expect California's GDP growth rate to exceed that of the U.S. through our forecast period."

Nickelsburg predicted a steady decrease in the state's unemployment rate over the next two years, reaching about 5 percent. Employment growth will be 1.9 percent this year, then 1.6 percent and 1 percent during the next two years, according to his report.

On the national front, Senior Economist David Shulman wrote that fears of a recession sparked by recent drops in the stock market have subsided, and markets have calmed and even wiped out most of the earlier losses. He warned, however, that there are still some potential shakeups in the global market, including the United Kingdom's pending decision on remaining in the European Union and, of course, the U.S. presidential election.

Shulman still predicted moderate economic growth, with a 2.7 percent boost in real gross domestic product for the year. His report also foresees the creation of 2.4 million jobs this year and 1.5 million next year.

"Growth will be driven by increases in consumer spending and housing along with the end of the inventory correction we are now going through," Shulman wrote. "The risks we envision largely come from outside of the U.S. domestic economy where disturbances in Europe and Asia along with domestic politics have the potential to cast a pall over the economy."

City News Service; Photo: Shutterstock