California's economic growth will continue to outpace the rest of the nation over the next five years, according to a new forecast, though the expansion is expected to slow after next year.
Despite recent turmoil in the financial markets and slowing growth in China, the Los Angeles County Economic Development Corp.'s annual forecast predicted continued job growth and economic output in the state through 2020.
Job gains next year will continue to be driven by growth in construction, professional and technical services, and transportation and warehousing tied to international trade, the report found.
The forecast from the LAEDC expects job growth of 2.9% this year and 2.4% next year, compared with 2.1% and 1.8% for the nation overall. A similar report released this week by the UCLA Anderson Forecast pegged job growth in California at 2.2% next year and 1.4% in 2017.
The UCLA report also predicted that California's unemployment rate will continue to dip to 4.8% in 2017, the same rate as the U.S. overall. California's unemployment rate is currently at 6.1%, higher than the U.S. rate of 5.1%.
In Southern California, the fastest job gains through 2020 are expected in the Inland Empire, followed by Orange County, Ventura County and Los Angeles County. Employment growth in Los Angeles County is typically slower than other parts of the Southland because of its sheer size.
For international trade tied to the ports of Los Angeles and Long Beach, the LAEDC forecast projects that consumers in the U.S. will still drive continued growth in imports. But it cautions that exports could suffer in the short term if the economies of China and its trading partners continue to slow.
In the long run, however, the report predicts that China's economy will shift more toward a consumer-driven economy, benefiting California exports such as computer products and crops such as almonds. "Rising incomes and stronger purchasing power will fuel Chinese demand for U.S. goods and benefit the Los Angeles economy," the report found.
The housing market recovery is expected to continue next year, as employment growth boosts household income. But wage growth has not kept pace with rising home prices -- a particular problem in California.
And the problem doesn't show signs of improving. The LAEDC report found that only 30% of California households could afford to buy a home at the median price in the second quarter of this year, down from 34% in the first quarter.
"If demand continues to outstrip supply, especially in metro areas with strong job growth,
affordability problems will become even more acute," the report concluded.