The “everything is awesome” UCLA Anderson Forecast just predicted that over the next two years, technological advancements from California will make U.S businesses more productive and double the national growth rate.
Anderson Forecasts, like other academic reviews, have a poor record of calling economic turns. Their projections have tended to be overly optimistic about positive impacts from Silicon Valley technology growth, and not negative enough about California job destruction caused by the nation’s highest tax rates and worst regulatory burden.
With the 2008-2009 Great Recession about to double unemployment and threaten California state government insolvency, the Anderson Forecast was oblivious to the size of the economic Death Star that was about to clobber the Golden State:
December 7, 2006 [Peak of housing market]: “UCLA Anderson Forecast Holds the Line: No Recession in National Forecast;
April 2, 2008 [Just after Bear Sterns failure]: “No Recession Imminent For National Economy;”
September 24, 2008 [One week after Lehman Brothers bankruptcy]: “No Recession Forecast for the Otherwise Stalled National Economy;” and
June 19, 2009 [Just before California unemployment spiked to over 11 percent]: “Economy Healing But Not Out of Hospital Yet.”
This year’s Anderson Forecast comes less than 48 hours after Governor Jerry Brown signed the nation’s first statewide $15 minimum wage, after the governor had earlier warned: “Raise the minimum wage too much and you put a lot of poor people out of work.” Brown cautioned that the state Department of Finance had estimated negative economic impacts from such a wage spike would cost California $4 billion a year.
Anderson Forecast Senior Economist Jerry Nickelsburg wrote in his Forecast Summary:
“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.” He added, “The very rapid growth in Silicon Valley and San Francisco attest to this fact.”
Despite claiming that over the next two years “we expect California’s GDP growth rate to exceed that of the U.S. through our forecast period,” Nickelsburg did acknowledge that everything will not be just unicorns and rainbows all the time.
“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.”
Nevertheless, Nickelsburg predicted steady California annual employment growth of 1.9 percent this year, followed by 1.6 percent and 1 percent job growth during the next two years, would push unemployment down from 5.5 percent to 5 percent by late 2018.
Anderson Forecast Economist David Shulman was even more optimistic for national growth. Despite a bumpy ride from January’s stock crash, as well as potential shakeups due to China, the United Kingdom’s pending decision on remaining in the European Union, and the U.S. presidential election, Shulman predicts the U.S. growth rate will double to 2.7 percent, creating 2.4 million jobs this year and another 1.5 million next year.